Fin-X Wealth Income MDA March 2026 performance report

Portfolio Performance

The Fin-X Wealth Income Managed Portfolio returned -1.84% for the March quarter, underperforming its benchmark by 1.70%. Despite this short-term result, the portfolio continues to deliver solid longer-term performance, returning 4.40% since inception, ahead of the benchmark.

The Investment Committee maintained a constructive yet vigilant posture over the March 2026 quarter, navigating a landscape shaped by three converging macro themes: the “SaaS Apocalypse,” escalating geopolitical tensions in the Middle East, and emerging fragilities within private credit markets.

Within this context, portfolio activity was concentrated in the Growth model portfolios, where a higher level of transaction activity reflected both opportunity and risk management. The rapid evolution of AI—particularly developments from players such as Anthropic—has continued to challenge the durability of traditional software moats and compress valuation multiples across the sector. The Committee used this dislocation selectively, initiating and adding to positions in high-quality growth businesses where valuations appeared to have reached technical support levels. These decisions were underpinned by a conviction that long-term secular winners are being temporarily mispriced amid short-term disruption.

At the same time, the Growth portfolios were incrementally repositioned to balance this opportunistic deployment with increased resilience. This included a measured allocation toward longer-duration government bonds, where real yields remain attractive and provide an effective hedge against a potential growth shock—particularly relevant given the elevated volatility across risk assets.

Macroeconomic considerations were central to portfolio positioning. The ongoing energy price shock—driven by the Iran-Israel conflict and the closure of the Strait of Hormuz—has reinforced the Committee’s view that inflation risks remain skewed to the upside. For Growth portfolios, this translated into a more nuanced approach: selectively maintaining exposure to structurally advantaged sectors, while tactically incorporating elements of defensiveness where appropriate. This included targeted exposure to Australian banks, despite elevated valuations, as well as increasing allocations to the Australian dollar and select emerging markets to enhance diversification and capture relative value opportunities.

Importantly, no positional changes were made within the Income model portfolios during the period, reflecting their existing alignment with current market conditions and the Committee’s view that their defensive positioning remains appropriate.

Looking ahead, the Committee remains firmly data-dependent, with a close focus on the RBA’s policy trajectory and the rising probability of a stagflationary environment. Within the Growth portfolios, there is a readiness to further adjust positioning—either by extending duration, increasing defensive exposures, or selectively deploying capital into dislocated growth opportunities—should the global outlook continue to weaken.

Portfolio Changes

Market Summary & Portfolio Positioning

Market Outlook

Although the economic outlook is sober, the earnings picture is less negative. AI investment is spreading beyond the major hyperscalers to a broader set of technology beneficiaries, predominantly in the US, and global earnings estimates have been supported by the sheer scale of that investment. Earnings multiples compressed as profits grew but re-expanded in early April and remain close to recent highs, as investors "bought the dip" with a bias towards technology names.

In Australia, the banks appear expensive relative to both their own history and international peers: the S&P/ASX 200 bank sector's dividend yield — including imputation credits — now sits below the RBA cash rate. The broader Australian market, however, trades closer to its long-term averages.

Concentration in higher-growth areas may reflect enthusiasm for a particular theme, though it could equally signal risk aversion and concern about the broader economic outlook. Either way, high valuations warrant caution: share prices remain vulnerable to higher rates and any earnings disappointment, and there is a strong case for greater discrimination in stock selection. So far, however, investors are not rotating out of equities into safe-haven assets.

Government bond yields rose in response to hawkish central bank guidance, though by less than the inflation and fiscal outlook might have implied. That investors appear to retain confidence in the inflation-fighting credibility of central banks is an important stabilising factor — and perhaps the most consequential variable to monitor in the quarters ahead.

Market Performance

After delivering strong returns in 2025, investment returns were weaker in the first quarter of 2026 as several headwinds emerged.

Geopolitics dominated financial headlines. Fractures appeared in the western alliance at Davos, where President Trump made territorial claims over Greenland. More dramatically, joint US-Israeli strikes on Iran at the end of February sent oil prices sharply higher, sparking fears of higher inflation and a possible growth shock.

Concurrently, a sharp repricing of software equities — dubbed the "SaaSpocalypse" — reflected growing concern that autonomous AI agents threaten the traditional software-as-a-service business model, prompting an abrupt reassessment of future cash flows across the sector.

American private credit funds, partly due to their exposure to software, saw large withdrawal requests, raising concerns of a solvency crisis in higher-risk lending. Higher-quality corporate bond spreads widened only modestly, and bank shares remained broadly supported by expectations of higher trading revenues and interest rates.

Equity markets reached their quarterly lows at end-March. Australian small caps fell -10.9%, while global small caps (-1.8%) and emerging markets (-2.8%) outperformed large-cap developed market peers (-6.2%).

Hedge funds offered better protection than international equity indices, though were hurt by the high US dollar exposure of the index as the Australian dollar rose. Gold retraced some of its recent gains but still finished the quarter +4.5% higher in Australian dollar terms.

The Australian dollar rallied as the RBA raised rates by +0.25% in February and March. Higher rates also weighed on Australian property trusts. Global infrastructure was a relative bright spot, benefiting from a positive earnings outlook as the conflict in the Persian Gulf reinforced the shift towards a more electrified economy.

Global Economy

At end-March, the war in the Middle East continued to dominate headlines. Iran found leverage through its ability to threaten the Strait of Hormuz: even without the naval power to enforce a full blockade, the threat to individual vessels was sufficient to void insurance contracts and dissuade shipping lines from attempting passage. Market volatility remained elevated, reacting sharply to announcements and social media posts from both sides of the conflict.

Early inflation readings point to a higher impulse from energy costs, though US housing has provided some offset, leaving the inflationary impact less severe than initially feared. Higher diesel costs and reduced natural gas exports from the Gulf are likely to weigh on supplies of intermediate goods such as fertilisers and helium in the months ahead, and some inflationary pressure has yet to work its way through the system.

The impact on economic growth is harder to gauge, not least because the timeline to resolution remains unclear. Household budgets are relatively tight as the challenge shifts from the rate of current inflation to the cumulative cost-of-living increases since the pandemic. The University of Michigan consumer confidence survey — the most sensitive to inflation among major American consumer surveys — recently hit an all-time low.

In Australia, the government halved fuel excise duties until end-June, suspended heavy vehicle road user charges, and took additional measures to avoid a supply crisis. Nonetheless, higher energy costs are likely to feed through into travel, food and goods prices in the months ahead.

Central banks responded with a hawkish pivot. Having spent considerable time extolling the importance of defeating inflation following the pandemic, policymakers were not prepared to abandon their commitment to price stability. For most, this meant simply delaying the rate cuts that had previously been priced in. The RBA went further, judging that the economy was experiencing excess demand relative to potential supply — a capacity deficit already generating inflationary pressure before the conflict began. Its February quarterly forecast projected inflation peaking at around 4.2% in mid-2026, well above the 2%–3% target. Rate rises in February and March brought the overnight cash rate to 4.1%, just -0.25% below its post-pandemic peak, and market pricing implies a further two quarter-point rises later this year.

Having been praised for avoiding over-tightening in 2023 and 2024, the RBA's hawkish pivot caught many off guard. The NAB Business Survey showed confidence falling to -29, a reading only surpassed to the downside in the immediate aftermath of the Lehman Brothers collapse in 2008 and the early stages of the pandemic.

May's federal budget will require a difficult balance. Higher public expenditure helped cushion the private sector slowdown in 2023 and 2024 but likely contributed to the inflationary pressures entering 2026. Potential capital gains tax reform and changes to the NDIS signal a tighter fiscal outlook ahead.

The US fiscal picture is materially different. On the negative side, new tariffs, a downsizing of the public sector, and the resumption of student loan payments all weighed on 2025 activity. In terms of stimulus, provisions of the "One Big Beautiful Bill Act" came into effect at the start of the year, including significant capital expenditure tax breaks to support re-shoring of manufacturing and an end to the taxation of tips. The principal benefits accrued to businesses, while higher healthcare and energy costs maintained pressure on households and consumer spending.

Historically, oil shocks and the tighter monetary policy that follows have tended to lead recessions. However, the elevated level of corporate investment is likely to prevent negative US GDP prints, even if growth adjusts to a lower trajectory. In April, the IMF trimmed its 2026 growth forecasts for both the US and the global economy, noting that risks were skewed to the downside.

Disclaimer

The contents of this communication are prepared by Brerona Capital Asset Management Pty Ltd (A.C.N. 627 650 293; AFSL 520526 trading as Fin-X Wealth). Any advice contained in this communication is general advice and does not take into consideration your personal objectives, goals, needs and financial situation. You should therefore not rely on the information contained in this email to make any investment decisions without first consulting an investment professional such as your financial adviser. Where there is any reference to specific products, you should obtain the relevant Product Disclosure Statement(s) and familiarise yourself prior to making a financial decision. The authors have relied on external data sources and as such do not guarantee the accuracy of the information, as such you should independently verify all data yourself. Any unauthorised use of this communication is prohibited. This email (including any attachments) is intended only for general information purposes. You must not copy, reproduce, disseminate, or use this document and its contents without seeking prior approval from Fin-X Wealth. We track our performance based on trade date +1 day, and we make the assumption that trades were placed at this time, this may not always be the case. This may result in timing differences for trades placed through our custodian not perfectly reflecting the reporting function which reports the end of day price. Actual performance you experience may not truly reflect the results outlined in the table due to timing differences, commission differences etc. Please take these performance numbers as indicative only.