Written by Dr Manny Pohl AM, Managing Director of FSI, CIO of EC Pohl & Co and ECP Asset Management.
Building on a Strong Foundation for 2025
As we close the chapter on 2024, a year marked by significant global economic shifts, geopolitical complexity, and technological advancements, ECP Asset Management stands proud of its achievements and resilient performance. In a year that challenged many active managers, as highlighted by Frontier Advisors’ 2024 report, our commitment to high-conviction, quality growth investing has yielded exceptional results across our portfolio. For many, the rise of artificial intelligence, easing inflation, and the political ramifications of the U.S. elections underscored the year’s challenges and opportunities. These themes not only tested global markets but also demonstrated the critical importance of strategic clarity and disciplined execution.
The attached chart of the S&P/ASX All-Ordinaries Accumulation Index provides an overview of the events that have shaped the market over the past twelve months.
Delivering Outperformance
After seeding our global growth strategy in 2020, we initiated its distribution this year and were rewarded with a mandate from a major institutional client. With an excellent three-year performance under our belt, we established a London distribution team, capitalising on the growing appetite for our Ireland-domiciled UCITS Global Growth Fund. Notably, our Global Growth strategy produced a +39.5% return versus the MSCI Index return of +27.0% over the calendar year to 30 November 2024. The exceptional results this year have illustrated the scalability and applicability of our investment philosophy across global equity markets.
Similarly, our Australian equity portfolios delivered outstanding results. The all-cap ECP Growth Companies Strategy continued its strong track record, returning +24.7%, outperforming the S&P/ASX 300 Accumulation Index return of +14.9% (gross of fees). The ECP Emerging Companies Strategy continued to demonstrate our ability to identify value in the mid-cap space, returning +27.0%, handily outperforming the S&P/ASX Small Ordinaries Accumulation Index return of +11.8% (gross of fees).
As a result of this outstanding performance, ECP Asset Management was propelled to the forefront of the Australian funds management industry. Our commitment to high-conviction, quality growth investing was recognised at the 25th Australian Fund Manager Awards, where we were honoured with the prestigious 2024 Best Large Cap Australian Equities Manager award by the Australian Fund Manager’s Association. This accolade not only validates our investment approach but also solidifies our position as a leader in active management, particularly noteworthy given the challenging environment for active strategies in recent years.
These milestones, coupled with strong portfolio performance and strategic expansion, have positioned us for continued success in 2025 and beyond. By remaining true to our principles and leveraging our unique approach to growth investing, we expect to continue to navigate and remain resilient to future challenges while maximising opportunities for our clients.
Shifts That Shaped 2024
As we reflect on the year, the IMF’s recent statement on global growth challenges has proven particularly relevant. Ageing populations, insufficient investment, and stagnant productivity gains have emerged as significant barriers to sustained growth. Against this backdrop, investor attention converged on three critical themes:
- The enduring impact and growth potential of the AI revolution.
- Disinflation trends and their influence on central bank rate policies.
- The economic and geopolitical effects of President Trump’s return to office.
Companies using AI reported tangible returns on investment, leveraging AI to enhance efficiency and strengthen their competitive advantage. From customer service innovations to proprietary machine learning models, AI has become a transformative force, underscoring a structural economic shift. Moreover, hyperscale cloud providers like Microsoft (NASDAQ: MSFT) have heavily invested in AI infrastructure, further driving adoption. While AI offers significant operational benefits, questions about its long-term scalability and broader impact continue to shape the conversation.
Disinflation has defined 2024. Easing inflationary pressures have fuelled optimism for potential central bank rate cuts to stimulate growth. While this trend offers relief, underlying risks in energy markets and geopolitical tensions persist are keeping investors cautious.
Lastly, President Trump’s return to power has reshaped the political landscape, reigniting debates on globalization and market dynamics with promises of protectionist trade policies and fiscal reforms.
Alpha by Design
Amidst this backdrop, ECP Asset Management has remained true to its process – focusing on the stocks in our portfolio rather than attempting to predict macroeconomic trends and industry responses. Some of our best-performing positions were high-quality but underappreciated companies that eventually gained market recognition, leading to stock price re-ratings. Nuix (ASX: NXL) and HUB24 (ASX: HUB) are prime examples, with year-to-date share price performance of +330% and +107%, respectively, as at the time of writing. Both companies, as software vendors in distinct industries, possess compelling competitive advantages and unique applications for AI to enhance customer value, all while expanding market share.
For us, having a stock-specific approach is central to our philosophy, driven by the belief that the economics of a business underpin long-term investment returns. Our rigorous research process evaluates industry dynamics, financial stability, and management capability, ensuring our portfolio comprises businesses resilient to macroeconomic challenges while positioned to seize growth opportunities. By leveraging our proprietary ‘Pillars of a Quality Franchise’ framework, we deliver sustainable alpha by identifying companies early, holding them long-term, and aligning capital allocation with market valuations.
For investors looking ahead to 2025, the three key themes of 2024 remain relevant, but their secondary effects deserve attention:
- AI Boom and Energy Demand: The increasing demand for energy-intensive computing power may lead to power bottlenecks, potentially sparking a new energy capex boom.
- Inflationary Pressures: Emerging energy shortages could add to global inflationary pressures, compounded by proposed U.S. import tariffs and potential trade frictions.
- Central Bank Policies: It may be premature to declare victory over inflation or assume central banks will follow the projected rate-cut cycle.
In this uncertain macroeconomic environment, we remain committed to our investment philosophy and investment strategy: investing in resilient companies with proven management teams, efficient operations, sound balance sheets, and strengthening competitive advantages that ensure sustainable, long-term growth. Despite these key themes lingering, we believe our approach will enable our portfolios to continue outperforming for the foreseeable future.
As we wrap up another successful year, I extend my warmest wishes to everyone for a wonderful Christmas and a happy, prosperous New Year.
Kind regards,
