Exclusive interview with Daniel Kelly, Chief Investment Officer, Viola Private Wealth
Global Investment Insights
with Daniel Kelly, Chief Investment Officer, Viola Private Wealth
Daniel Kelly is the Chief Investment Officer (CIO) at Viola Private Wealth, with over a decade of experience in private and investment banking. As CIO, Daniel leads the firm’s investment strategy, driving innovation and delivering market-leading solutions for clients.
A seasoned investment strategist, Daniel has worked with some of Australia’s most affluent families and individuals, providing sophisticated, tailored solutions across multiple asset classes, including equities, fixed income, alternative investments, and derivatives.
In this exclusive interview with Global Investment Institute, Daniel discusses Viola Private Wealth’s current investment focus, the evolution of modern portfolio construction, the rising demand for alternative investments, key allocation preferences in the current environment, and how Viola Private Wealth helps clients remain emotionally anchored through periods of market volatility.
Q. Where are you focusing your time and efforts in the current environment in terms of pursuing best investment opportunities and what risks are you concerned with and actively monitoring / managing?
A. A lot of my time is spent exploring and researching international opportunities. There is an inherent home country bias that a lot of Australian firms and investors have with regards to both their asset allocation as well as security selection. I make a conscious effort to ensure we do not fall into the same trap at Viola.
Global markets present some fantastic opportunities and are much deeper than those found in Australia. We are particularly focused on exploring offshore funds in the alternative investment category to ensure we are harvesting the alpha opportunities present in North America, Europe and APAC markets.
From a risk perspective, we are constantly monitoring and managing unintended duplications or overexposures in clients’ portfolios that may result from investing in funds with similar sector focuses or styles, as well as cross exposure of securities across listed markets.
A quick example of this would be the high concentration that public equity markets now have with a single company appearing in many active and passive funds as a material position. Given Nvidia’s recent milestone of being the first company to reach a US$4 trillion market cap, this name represents a material weight in both international and American markets.
If your client’s international equity allocation is the Nasdaq 100, S&P 500 and MSCI World, that may appear very diversified from an individual security perspective (those ETFs combined have 1,925 holdings) but they would end up with a total cumulative allocation to Nvidia of almost 27% across those three passive ETFs, all be it in a high-quality company.
We actively seek to think deeply about how our funds and allocations work together to avoid this concentration risk so that we are actually creating diversification with our allocations and not duplication.
Q. How has the asset allocation approach of a modern private wealth portfolio evolved and what impact has it had on your approach to how you construct portfolios and allocate capital to achieve your investment objectives?
A. Asset allocation really started with Harry Markowitz’s 1952 paper entitled ‘Portfolio Selection’ that was the birthplace of Modern Portfolio Theory. The outcome of this was the 60/40 portfolio that split risk between equities and fixed income respectively with the goal of achieving a higher risk-adjusted return (as measured by the Sharpe Ratio) than either of those individual asset classes alone.
Since this time, markets have evolved significantly, with the set of quality investment opportunities not just restricted to public markets. The growth, depth and democratisation of alternative investments (private equity, private credit, property, infrastructure, hedge funds etc) and the increasing sophistication of the average firm and investor, means that the 60/40 portfolio is no longer fit for purpose in the modern world, in our view.
For this reason, we advocate for our clients to hold a healthy amount of their strategic asset allocation in private market opportunities that not only serve to dampen the volatility a portfolio may experience during times of market stress, but also provides structural sources of alpha that can be extracted via information asymmetries.
From this perspective, we still use traditional asset classes (stocks, bonds and cash) as one core of a client’s portfolio but have a sophisticated way that we model and allocate across alternatives to take advantage of the recent structures and access points that have only become available within the last 24–36 months. We call this model the VPW Core² Satellite Asset Allocation Model™ that helps us not only produce higher returns for clients at a lower level of risk but also manage liquidity more effectively than we have seen done before.
Q. What are the main drivers of the growing appetite for alternatives in client portfolios and what key objectives are you looking to achieve through your alternatives allocation?
A. Whenever we are selecting an asset class or securities, we are looking for attractive risk-adjusted returns, and those returns can only come in three variations, those being income, growth or a combination of the two.
The overarching role for alternatives in portfolios is still to deliver income or growth objectives for a client, but to do so in a manner that reduces the level of mark-to-market volatility and provides a source of uncorrelated returns, compared with those generated in equities or fixed income. By diversifying the factor returns that a portfolio is exposed to, you build a more resilient structure that has a higher likelihood to outperform regardless of market conditions.
At the portfolio level, this then reduces the risk and increases the return which is the gold dust of portfolio construction. These benefits, and their increasing awareness, are what have driven the significant and growing appetite for alternatives.
I have published a paper on this topic titled ‘Alternatives and their Role in Modern Portfolio Management’, which is publicly available for anyone that wants to read into this further.
Q. What alternative investments are playing a growing role in your portfolio? What types of investments are you favouring vs avoiding in the current environment?
A. There are two main categories that we are favouring, although we are consistent investors across the full private market spectrum: Australian venture capital and global infrastructure.
For Australian VC, there are some thematic reasons why we believe that current vintages have the potential to outperform relative to the last few years. One of these is the significantly reduced number of Tier 1 Australian funds that are currently raising in 2025, despite capital inflows into the sector picking up materially compared with 2023 and 2024, and a continued healthy pipeline of innovative software and technology-focused businesses to invest into.
Similarly to the period 2009–2011, where fewer funds and lower valuations drove higher ownership levels from GPs, the current market is experiencing similar tailwinds. In 2025, and likely through 2026, VC firms have a window to deploy capital into a less competitive marketplace which is also only captured domestically by a handful of quality firms. This is further compounded by the ESVCLP tax incentives for early-stage investment which make the IRRs generated essentially tax-free for investors committing capital to a qualifying fund. VC, however, is only appropriate for a certain type of investor who has the right risk tolerance and ability to lock up capital for 10 years or more, so it is used selectively in our portfolios.
For infrastructure, we have been and will continue to be users of the asset class in client portfolios as it achieves multiple objectives in the one asset, which is a rare combination.
From our infra funds, we typically expect target returns between 10-14% p.a. where around 3-5% of that is also paid out as periodical income. Infrastructure is also an inherently defensive class, backed by real assets, that often have contractual cashflows that are indexed to inflation. The combined result of this is an investment which achieves both income and growth objectives in a defensive manner, reduces volatility, enhances returns and protects the investor from inflation. That is a difficult combination to beat.
Q. How do you approach the emotional effects of portfolio construction and investing, when building portfolios, and what strategies have you found to be effective in helping clients build comfort with your approach to stay committed through periods of uncertainty/volatility?
A. We remain crucially aware that we are managing our clients’ life savings which are the culmination of decades of hard work and sacrifice. When we go through periods of volatility, like that in early April 2025 following the Liberation Day tariff announcement, our clients look to our experience and expertise in managing money to guide them and expect that their portfolios will be constructed in such a way that they can weather the storm without a material drop in value.
Although periods like this are an inevitable part of investing, for those who do not work day-to-day in portfolio management, they are no easier when they arrive and as such, we significantly increase the frequency of our communication to clients. This acts as both an emotional support mechanism to give them comfort that we are their eyes and ears with financial markets, but also to look for opportunities to deploy capital into periods of weakness.
Assets which are not priced mark-to-market and do not trade on sentiment-driven buying and selling provide a material emotional dampening effect during periods of dislocation, as the unit price does not move around as much as the headlines do.
Although there are well-founded arguments that the financial volatility of asset classes like private equity and private credit is much higher than that which is actually measured, they still have a vital role in reducing the probability that an investor will panic during these periods and sell at a less-than-optimal time. This benefit is not spoken about as much as it should be, as one of the main arguments why alternatives play a vital role in any well-constructed modern private wealth portfolio.
Daniel Kelly, Chief Investment Officer, Viola Private Wealth
Daniel is the Chief Investment Officer at Viola Private Wealth, bringing over a decade of experience in private and investment banking. A seasoned investment strategist, Daniel has worked with some of Australia’s most affluent families and individuals, providing sophisticated, tailored solutions across multiple asset classes, including equities, fixed income, alternative investments, and derivatives.
His deep understanding of public and private markets, combined with his ability to identify forward-thinking opportunities, ensures that Viola Private Wealth remains at the forefront of investment excellence. As CIO, Daniel leads the firm’s investment strategy, driving innovation and delivering market-leading solutions for clients.
His strategic mindset and global investment acumen reinforce Viola Private Wealth’s position as the premier destination for high-net-worth individuals and top-tier financial advisers. Daniel’s approach aligns seamlessly with Viola Private Wealth’s commitment to bespoke wealth management, ensuring that clients not only preserve their wealth but continue to grow it across generations.
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