Exclusive interview with Lydia Kav, Head of Multi-Asset, Perpetual Private
Global Investment Insights
with Lydia Kav, Head of Multi-Asset, Perpetual Private
Lydia heads the Perpetual Private Multi-Asset team, leading the investment research process with a view to generating consistent client outcomes in line with Perpetual’s investment philosophy. Lydia’s team aims to drive growth through innovative investment solutions for clients through their suite of multi manager funds, model portfolios and their approved product lists. Lydia is also responsible for the multi-manager research investment process, asset allocation methodology and investment strategies across all asset classes, public and private, traditional and responsible, in Australia and globally.
In this exclusive interview with Global Investment Institute, Lydia discusses how the team manages diversified portfolios across listed and unlisted markets, with a particular emphasis on alternatives. She shares insights into where Perpetual Private are finding opportunities across asset classes, how they’re positioning portfolios amid elevated valuations, and the key themes shaping their approach in today’s late-cycle environment.
Q. In your role as the head of the team that manages multi-asset portfolios across asset classes, can you share the areas of focus for your team and where you are seeing/pursuing investment opportunities?
A. At Perpetual Private, our funds and models are very diverse, particularly in the alternatives space (where we offer two funds, a Growth Opportunities Fund and Income Opportunities Fund), so fair to say we are always covering and researching every asset class!
Both global and Australian equities have been a focus as we continue to evolve our portfolios in anticipation of benchmark structural changes, such as the increased concentration amongst global mega large caps.
The alternatives space is extremely broad and varied, so we are always assessing new opportunities here. Our mid-size means we are small enough to pursue and analyse niche strategies (such as aviation leasing or insurance linked strategies); yet large enough to sit at the table of all large global asset managers, such as PE giants Blue Owl in NYC and invest in their recent GP Stakes offering. Nothing is off the table, and we love to source new global and innovative opportunities across all sub-segments.
Q. With your responsibilities spanning both listed and unlisted investments, how do you view the relative value across public vs private markets in the current environment?
A. The strong returns exhibited in both private and public markets over the past couple of years, means that most asset classes across both spheres, are expensive. Although, there are some tail-end exceptions.
Few would debate that listed equities are at their potential peak valuations (although pockets of value would exist in small caps or some geographies). Investment grade and some lower quality credit are also expensive with near-record tight spreads, and this is certainly the case for both public and private markets, with the darling of the past couple of years, private credit, also seeing total yields commensurately receding. On the other hand, private equity and unlisted real estate have still not materially bounced from their recent woes, although green shoots are appearing and we see potential of strong future returns in some select pockets of these markets.
Q. Are there any particular investment themes you are exploring and how are you capturing those themes in practice to ensure they are reflected in your portfolio?
A. Some of the regime changes of late, for example, the receding of USD strength or rise in gold valuation, has seen some healthy debate amongst the team. As part of our investment process, the right level of currency hedging is monitored, and our SAA process will allow us to question the role or introduction of certain commodities.
As mentioned earlier, we also spend a lot of time understanding listed market benchmark changes, and we forever talk about market risks and whether we need to tactically move in/out of sectors in response to material shifts. Generally, however, we try to look through short-term noise or geopolitical fires and stick to our philosophy of “protect and then grow” investing, by focusing on longer term investment horizons. As such, we stick to our knitting and core investment beliefs.
Q. What are the key risks to your portfolio that concern you most? What actions are you and your team taking to actively managing them?
A. The main concern at present is the current exuberance in public equity and credit markets, and the fact that the US market and economy are charging ahead, particularly on the promise of significant AI returns. Not that we believe there are material fundamental economic shocks on the horizon; however, the risk of a re-pricing of asset markets is high and potentially ripe for correction.
Overall, this means that our fundamental investment thesis remains conservative and forever thoughtful. We are not taking excessive risks, nor stretching for unnecessary yield, nor concentrating allocations (particularly in alternatives, where our funds are highly diversified to ensure defensiveness). Our due diligence is deep and detailed, and generally we believe that large global asset managers with strong track records and work-out experience (in alternatives) is paramount during this late-cycle environment.
Q. Are there particular asset classes/themes where you see risks of bubbles forming and conversely, are there any overlooked asset classes that offer attractive relative value?
A. We don’t think the US mega cap market is ‘yet’ at the bubble stage of the prior TMT bust due to the high-quality nature of these companies, but it is certainly marching in that direction. We also don’t think that corporate America has fundamental structural issues yet, but both public and private credit markets are exhibiting signs of late cycle froth with an increasing amount of structured new products coming to market, and the advent and growth of liability management exercises that mask the true level of defaults.
Conversely, we do think that real estate globally will soon offer some great entry points and potential returns (although office may take a while longer), and we’re already seeing PE markets bounce off anaemic activity. There are always opportunities out there and we’re privileged to say we have access to so many of these, so it certainly keeps us all very busy.
Lydia Kav, Head of Multi-Asset, Perpetual Private
Lydia heads the Perpetual Private Multi-Asset team, leading the investment research process with a view to generating consistent client outcomes in line with Perpetual’s investment philosophy. The team aims to drive growth through innovative investment solutions for clients through their suite of multi manager funds, model portfolios and our approved product lists. Lydia is also responsible for the multi-manager research investment process, asset allocation methodology & investment strategies across all asset classes - public and private, traditional and Responsible, in Australia and globally.
Lydia joined from AMP Capital, where as Head of Sector Multi-Manager she led the multi manager team of portfolio managers investing across all asset classes. Her previous roles included Senior Portfolio Manager (Fixed Income), Investment Specialist, and Co-Head of Quantitative Analysis & Risk Management (Fixed Income). Lydia holds a Bachelor of Commerce and Administration, with first class Honours in Economics, from Victoria University in New Zealand.
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