U.S. markets rose overnight, with the Russell 2000 small caps leading gains and Chinese tech stocks also rallying. Optimism remains high after the Federal Reserve delivered the widely expected 25bp rate cut. In corporate news, Intel shares surged 22% after Nvidia announced a $5 billion investment to co-develop data centres and PC chips.

Commentary from Industry Leaders

This week I had the pleasure of catching up with Tom Perfrement, Investment Manager at 5AM Capital, who shared some of the key trends emerging from earnings season across two of their Global Equity Fund’s core segments: Essential B2B Software and Infrastructure.

Regarding essential B2B software, Tom noted; “Across earnings season, even though the market narrative of "AI eats software" is persisting, we found that the ‘must-run’ software stack kept showing its durability — mission-critical platforms took price, expanded seats and layered AI add-ons without denting churn. In our portfolio, Microsoft’s Copilot is accelerating adoption, Intuit is embedding Intuit Assist across QuickBooks/TurboTax to automate compliance, and Adobe is standardising creative workflows with Firefly inside Creative Cloud. Budgets may be tight for traditional software as spend moves to AI, but our view is that the B2B software systems that sit closest to cash collection, compliance and productivity — will continue to be durable, the last to be cut and the first to receive incremental dollars when appetite for software returns. 

It is important to be selective in software (as some names will be disrupted) but there are also some bargains in the space (particularly B2B names) that are entrenched in workflows and are not going anywhere/not going to be displaced any time soon by AI. 

We have also seen the emergence of AI’s disruption of search/advertising with CEOs across multiple industries highlighting the difficulty in defending organic SEO traffic (e.g. Monday.com) as large language models reshape search and advertising economics. We anticipate this to continue and so businesses with high levels of direct/organic traffic are likely to fare better."

Tom then shared the following insights on infrastructure; “The multi-year build-out in AI/data centres and the energy/grid refresh continues to drive resilient demand across essential infrastructure. We see it in Amazon (AWS) and Microsoft (Azure) adding capacity with accelerating growth and Eurofins’ testing backbone for environmental and energy projects. 

On the physical side, airports like Fraport and Flughafen Zürich are benefiting from constrained slots and inflation-linked charges that translate capex into durable cash flows. These are classic picks-and-shovels assets — high barriers, regulated or contracted revenues, and long-duration earnings that we like. 

In infrastructure we think it is very important to be selective because the AI-infrastructure super-cycle continues to drive results, but we see major risks in extrapolation of this trend. Hyperscaler capex digestion is ahead, and sectors like semis appear to be over-earning in this part of the cycle. Preserving optionality until software monetisation catches up to hardware spend is key in our view."

Tom’s insights are valuable and since inception in July 2022, the team at 5AM Capital has delivered an impressive 19% compounded annual return. 

(Data Source: 5AM Capital Global Equity Fund Presentation)

(Note: The period of the returns are from 1st July 2022 to 30th June 2025) 

Economic News 

The Federal Reserve cut interest rates by 25 basis points this week, making the first step in what markets expect will be a broader easing cycle. The move was widely anticipated, as recent labour market weakness and softer inflation data reinforced the case for policy support. 

Lower rates reduce discount rates which are generally supportive of equities, particularly growth and technology stocks that are sensitive to financing costs and future earnings.

Lower rates also typically make infrastructure and property-linked investments more attractive, as they benefit from lower funding costs while still offering inflation linked cash flows.  

While the cut should provide a short-term boost to risk assets, it is also a response to slowing economic momentum. Therefore, portfolios should balance growth exposure with defensive income assets and real assets that can provide stability if the slowdown deepens.

Market Snapshot 

• Australia: ASX rises as healthcare and energy bounces. 

• United States: Dow +0.27%, S&P500 +0.48%, Nasdaq +0.94%.

• Bonds: US 10 year yield at 4.10% and Australian 10 year at 4.19%.

• Gold: Prices declined overnight.

Investment Update

On Monday we hosted Gregg Taylor and Emily Mohan, Investment Directors from Salter Brothers Equities Funds Management, who provided updates on the Salter Brothers Tech Fund.

The fund currently holds five investments and is targeting a total portfolio of eight to ten companies. Gregg shared progress on several key businesses that were in the fund when our clients invested.

• Prospa – Acquired in 2024 for $74 million, Prospa is now generating over $2.5m in cash profit per month (or a run-rate of approximately $30 million in profit per year). The Company is still held at a valuation of $74m in the portfolio, however, industry comparable companies trade on between 8 - 10x cash profit. On this basis, it would value the company at between $240 - $300 million. The company remains held in the fund at a $74m valuation, however Gregg noted that an exit could take place in the near future, with proceeds to be distributed to investors.
  
  

• IPSI – Purchased at a valuation of just shy of $20 million, IPSI delivers advanced digital payment and data services via a next-generation cloud-native platform. It is the only company in Australia with Dynamic Least Cost Routing technology, allowing merchants to automatically select the cheapest payment network for each transaction in real time. IPSI is currently in an exclusive exit process with expectations of between 2 – 3x MoM returns.
  
  

• Skymesh – Valued at $48 million, Skymesh has grown strongly and is now in the acquisition phase. Gregg indicated that the company is considering material acquisition opportunities and that a future ASX listing is a potential pathway as the business continues to scale. As a reminder, Skymesh has brought together a significant telecommunications board, with Jordan Grives appointed as Managing Director (Ex Uniti Group), Vaughan Bowen as Executive Director (Ex M2, Vocus and Uniti Group) and Paul O’Neile as Non-Executive Director (Ex Boost Mobile), as well as strengthened the leadership team with significant appointments across the CFO, CTO and COO functions.

Gregg highlighted a growing theme within the fund around the privatisation of school sports. To capitalise on this trend, the fund has recently acquired Bring It On Sports and Let’s Play, combining them under a new platform called ‘Sports Collectiv’.

The Sports Collectiv business is designed to provide:

• Sporting programs across multiple codes

• End to end, competition and community based platform (includes registration, uniform purchasing, compliance and insurance solutions)

• CRM systems tailored to professional sporting organisations

Gregg also mentioned that the team is in advanced discussions to secure a new partnership with the American Football Association, which would further expand the platform’s reach and opportunities.

Co-Investment Opportunity: Marketboomer 

Gregg also shared details of an existing co-investment opportunity into Marketboomer, a leading proptech business providing a B2B eProcurement SaaS platform that connects hotels with suppliers across the hospitality industry. The platform already features 80 software integrations, making it a highly versatile and attractive solution for operators. He also mentioned Marketboomer is currently valued at $26 million, and Salter Brothers are in the race to secure a global contract with a leading hotel group, which would further strengthen and transform the company’s position in the market. This among an already strong pipeline of customer opportunities.