Market Commentary - January

Glenmore Asset Management

February 2026

(2-minute read)

Funds operated by this manager:

Glenmore Australian Equities Fund

10k Words

Equitable Investors

February 2026

(2-minute read)

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Precious metals reacted savagely on the Kevin Warsh Fed Chair nomination. The "AI" capital drain bites for hyperscalers at the same time AI's rapidly improving capabilities bites for technology services. Government bond yields have been rising with low volatility amid broader market gyrations. Those gyrations were most apparent in the worst week since Covid-19 rocked markets in 2020 for Australia's small resources and large IT stocks. Valuation metrics in US tech - and software in particular - have taken a haircut. Regime change is apparent with the majority of stocks outperforming rather than the market being led by a few key stocks - both in the S&P 500 and among Australia's small caps. There is a huge dispersion in valuations among small caps to play with. Finally, US Office CMBS delinquency rate spiked to a record 12.3%!

The "Warsh Effect" dents Gold and Silver price performance over past five years

 

Source: Equitable Investors, Koyfin

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"AI" divergence - market punishing MSFT for high capex

Source: Equitable Investors, Koyfin

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Capex as % of operating cash flow for "hyperscalers" (MSFT, AMZN, GOOGL, META, ORCL)

Source: Bank of America Global Research

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Hyperscaler's combined capital expenditure in US dollars

Source: Bloomberg

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India's IT services giants sold off on fears of IT disruption

Source: Equitable Investors, Koyfin

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US 10 year bond yield relative to MOVE Index of implied bond market volatility; and Equitable Investors' Bond Market Sentiment indicator

Source: Yale, Equitable Investors

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Aus 10 year bond yield relative to realised volatility; and Equitable Investors' Bond Market Sentiment indicator

Source: RBA, Equitable Investors

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Largest weekly precentage falls for three S&P/ASX indices

Source: Iress, Equitable Investors

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Impact on ASX small caps from factor shocks - implied by historical performance relative to proxy ETFs

Source: Equitable Investors

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Recent pull-back in US tech EV/EBITDA multiples

Source: Koyfin, Equitable Investors

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US Software sector median EV/Revenue multiple

Source: Altimeter

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Surge in % of S&P 500 companies beating the index

Source: Ned Davis Research via The Kobeissi Letter

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A regime shift with a surge in the percentage of stocks in the S&P/Small Ordinaries Index that outperformed the market cap weighted average return

Source: Koyfin, Equitable Investors

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Dispersion of valuation multiples among US and Australian small caps

Source: Koyfin, Equitable Investors

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US Office CMBS delinquency rate spikes to record 12.3%

Source: Trepp via WOLFSTREET.com

Funds operated by this manager:

Equitable Investors Dragonfly Fund

Disclaimer

Past performance is not a reliable indicator of future performance. Fund returns are quoted net of all fees, expenses and accrued performance fees. Delivery of this report to a recipient should not be relied on as a representation that there has been no change since the preparation date in the affairs or financial condition of the Fund or the Trustee; or that the information contained in this report remains accurate or complete at any time after the preparation date. Equitable Investors Pty Ltd (EI) does not guarantee or make any representation or warranty as to the accuracy or completeness of the information in this report. To the extent permitted by law, EI disclaims all liability that may otherwise arise due to any information in this report being inaccurate or information being omitted. This report does not take into account the particular investment objectives, financial situation and needs of potential investors. Before making a decision to invest in the Fund the recipient should obtain professional advice. This report does not purport to contain all the information that the recipient may require to evaluate a possible investment in the Fund. The recipient should conduct their own independent analysis of the Fund and refer to the current Information Memorandum, which is available from EI.

Hedge Clippings | 13 February 2026

The normally calm and rational exterior persona of RBA Governor Michele Bullock was rattled this week when her integrity was questioned during a heated Senate estimates hearing, when she was accused by Nationals senator Matt Canavan of "gaslighting" Australians when describing the economy as doing "okay".

Given the current state of the Federal coalition, it is no wonder that Canavan tried to distract attention away from both the on-again-off-again shambles within the opposition, or the fact that they have been incapable of landing a blow on either Chalmers or Albanese, in spite of the opportunity, or need, to do so.

However, it caused Hedge Clippings to turn to the dictionary (via Google) to clarify the term "Gaslighting", which wasn't a term with which we were overly familiar. It turns out it was the Merriam-Webster Dictionary "Word of the Year" in 2022, and is defined as "the act or practice of grossly misleading someone, especially for one's own advantage".

No wonder that Canavan, and no doubt most politicians we can think of, are familiar with and use the term, given how well versed they must be in its implementation. And no wonder that Michele Bullock was so quick to refute the allegation.

The RBA may well have jumped too quickly when cutting rates three times last year, only to see inflation start to nudge back up again, but to consider their statement and Bullock's media conference post meeting as "misleading" was bound to elicit a swift rebuttal.

What obviously irked Canavan was that Bullock refused to pin the blame for rising inflation on Jim Chalmers and government spending, instead noting that while it contributed, there were other factors involved, including private demand, which had been stronger than expected.

She also raised one of the major issues for the economy, namely stagnant productivity, which she termed "Australia's non-inflationary speed limit", and that unless productivity lifts, the economy may struggle to grow sustainably above 2% without fueling inflation further.

Unfortunately, we can't see productivity suddenly changing, and if that's the case, it's likely that inflationary pressures will continue to rise, as will interest rates.

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Australian and New Zealand Private Debt Market Quarterly Review

Revolution Asset Management 

January 2026

(8-Minute Read)

Market overview

The year 2025 ended with a continued constructive tone across all investment asset classes, with a 'risk-on' sentiment that was consistent for much of the year. Volatility was largely contained, punctuated only by a handful of brief dislocations - the most notable occurring during the Liberation Day tariff period. The broad-based rally has continued with record highs being tested in equities, precious metals, credit spreads and real estate valuations through the back end of 2025.

In interest rate markets, there seems to be an emerging disconnect between the trajectory of the US versus other developed markets. In the US, inflation has yet to pick up and the economy continues to grapple with cost-of-living pressures. By contrast, the UK, Canada and Australia have all witnessed a significant uptick in inflation. This translates into potential interest rate cuts in the US (aided by US President Trump actively lobbying the US Fed) compared to other developed world central banks commencing or looking to hike interest rates to tame inflationary pressures. This backdrop has led to the weakening of the US dollar and the so-called 'de-dollarisation', as leading market commentators increasingly question the durability of the US dollar's status as the world's reserve currency.

Closer to home, the RBA at the conclusion of 2025 signalled to the market that interest rate cuts previously factored in for 2026 were off the table, following a surprisingly high inflation reading of 3.8% in December. In fact, many economists were forced to backflip from their previous vocal rate cut calls to then predict multiple interest rate hikes this year. In the most recent January CPI monthly reading, inflation has moderated to 3.4% which has tempered rate hike expectations, with the market now predicting an almost certain 25 basis points (bps) rate hike by August 2026. The RBA ultimately has time to assess whether inflation will come into its target 2-3% band over the next few months, before having to make any decision to adjust the current cash rate of 3.6%.

From Private Equity to Private Credit: A Market Transformation

As we enter the new year, it is worth reviewing the continued development of the private credit market globally. From humble beginnings, there has been nothing short of an explosion in private credit. According to Preqin, the private credit market has risen from US$250 billion in 2007 to a staggering US$2.5 trillion, globally. This phenomenon is best illustrated by the largest private equity firms, many of which now operate substantial private credit operations, often with more assets under management (AUM) in credit than in private equity. As an example, Apollo Global Management has a significantly larger private credit AUM of US$690 billion compared to its private equity AUM of US$150 billion. Ares Management, Blackstone, Brookfield, and KKR also share this trait, having substantial private credit businesses that rival or exceed their private equity AUM, as shown in the chart below.

These once celebrated and successful private equity managers have effectively morphed into major private credit firms. The principal reason for this has been the attraction of a more conservative asset class, where scale allows these firms to underwrite and hold whole loans that would have previously been financed by banks or the broadly-syndicated loan/CLO markets.

The Largest Private Equity Firms Have Become Major Private Credit Players

Source: Gain.pro and public filings. Analysis excludes infrastructure and real estate funds but includes secondaries.

As the private credit market continues to mature, it is fair to say that there has been a permanent shift away from banks being traditional lenders to companies �' from middle market size all the way through to the very largest privately owned corporates. At the same time, there has been an absence of a meaningful recession (negative COVID-related impacts were short-lived thanks to co-ordinated fiscal and monetary policy stimulus) which has supported consistently robust returns in private credit, with little dispersion between top and bottom quartile managers. This has fuelled the growth in both fundraising and deployment by the large as well as smaller credit managers in the sector.

As Private Credit Grows, Loan Protections Erode

While the overall trajectory of the private credit market has been positive, there have been some unwelcome signs that there may be cracks emerging. The rapid pace of fundraising in a prolonged, benign, 'risk-on' environment has created mounting pressure to deploy capital. This has led to weakening terms and conditions of new private credit loans, as demonstrated by the increasing prevalence of covenant-lite loans in both broadly syndicated loans and private credit markets. Since 2011, the share of covenant-lite loans has risen dramatically. In the US private credit market, they accounted for around 15% of broadly syndicated loans in 2011, climbing to over 90% by 2023. Covenant-lite loans offer fewer financial restrictions and protective covenants for lenders than typical loan agreements, reducing safeguards in the event of borrower stress. In addition, over the past two years, covenant-lite issuance has become commonplace, especially in larger deals exceeding US$500 million.

Furthermore, high-profile defaulted and fraudulent loans to companies such as First Brands and Tricolor have highlighted a lack of thorough due diligence and weakened credit underwriting standards that has led to multi-billion-dollar losses to private credit lenders. These cases provide additional evidence of the pressures to deploy capital and the intensifying competition within the market.

While these trends are US specific, similar dynamics are emerging in Australia. Many larger private credit funds have grown comfortable with weaker terms, conditions, and documentation, drawing on their experience in international markets. This has intensified competition for larger leveraged buy-out loans, often with terms that benefit borrowers at the expense of traditional lender protections.

Another feature which we have witnessed in the larger international funds is their more recent adoption of asset backed securities (ABS) or asset backed finance as a complement to their leveraged finance focus. This is principally due to ABS transactions having a much more prescriptive treatment of cashflows and stringent performance triggers that are embedded in comprehensive documentation as well as better margins for the risk. As such, there has been greater competition in the areas in which Revolution looks to deploy capital.

Commitment to Credit Quality and Investor Transparency

In today's environment of heightened competition and weaker loan terms, maintaining rigorous credit discipline is more critical than ever. Revolution has been able to maintain a high level of capital deployment and at the same time maintain high levels of credit quality principally due to the firms scale and target yield.

Although operating on a smaller scale than the global private credit giants with Australian operations, Revolution has established a leading position in Australia and New Zealand by being able to provide in excess of A$200 million per transaction for loans that are priced with credit margins between 400 bps and 600 bps.

In an environment where credit underwriting standards and documentation have weakened, Revolution remains focussed on thorough due diligence of each loan and maintains very strict quality standards. This discipline is evidenced by avoiding payment-in-kind (PIK) loans, cyclical exposures, lending to small or start-up counterparties, and entering into loans with very weak lender protections.

In more recent portfolio transactions, Revolution has been able to take a cornerstone lender role through shaping key terms and conditions, as well as demand superior economics more akin to underwriting fees than syndication fees.

In our last quarterly report, we discussed the findings of the two ASIC reports of the Australian private credit sector and outlined Revolution's response. The key findings of these reports �' covering areas such as treatment of upfront fees, independent portfolio valuations, avoidance of related-party transactions, and transparency on underlying loan portfolios - align closely with Revolution's existing practices. We are continually looking at ways to improve and remain committed to transparency and prompt responsiveness to ASIC's recommendations.

Business Update: Strategic Partnership, New Products and Team Growth

During the quarter, it was announced that Revolution agreed to form a strategic partnership with ColCap Financial Group (ColCap) by selling a 14% stake in the firm to ColCap. ColCap is a leading non-bank originator of Australian mortgages with over a 20-year track record in originating and servicing these loans with an exemplary track record. The nature of the strategic partnership with ColCap will allow Revolution to bring two new products to market throughout the course of 2026. We look forward to presenting these products to our investors in due course.

We are pleased to announce the addition of two new members to the Revolution team. John Price joined the firm at the end of 2025 in the newly created role of Head of Strategy and Distribution. John is a seasoned professional with over 20 years' experience in financial markets. He will be responsible for working with the Channel Capital distribution team in servicing existing clients, assist with capital raising, and contribute to the development and launch of new and innovative products in 2026 following the strategic partnership with ColCap. In addition, Christian Burrello joins as an Investment Analyst and will work closely with the investment team responsible for the senior secured corporate loans and real estate loans in the portfolio. We are proud to welcome the new members of the team in line with the firm's growth.

Portfolio and pipeline review

The Revolution Private Debt Fund II (the Master Fund) has returned 0.67% (after fees)* in December and is meeting its target return of the RBA cash rate plus 4% to 5% p.a. (net of fees and expenses) since inception.** The objective of the Master Fund is to achieve this return with low volatility and with the benefit of having security over the underlying assets.

The Master Fund has a total fund size of A$3.06 billion as at 31 December 2025. The Master Fund held a total of 57 loans as at 31 December 2025, with an average expected life of the portfolio being 1.9 years. The portfolio yield to maturity is 8.84%, with a credit spread of the portfolio above BBSW of 493 bps. The average credit rating of the portfolio is BB.

The deal pipeline in Australia and New Zealand remains robust, which should allow for continued strong deployment. In Senior Secured Corporate Loans, activity has increased in the second half of the year as was expected earlier in the year. The Asset Backed Securities market remains active. Revolution has been focused on upsizing many of its existing private warehouse investments as the size of facilities and the Fund's appetite grows in tandem while investing in new warehouses from well capitalised preferred originators. Additionally, Revolution continues to find and capitalise on attractive secondary market opportunities across sectors.

Source: Revolution Asset Management. See below for defined terms.

Revolution Private Debt Fund II (CHN3796AU)*
Performance as at 31 December 2025.

* Performance is based on month end unit prices before tax. Net performance (after fees) is calculated after management fees and operating costs. Individual Investor level taxes are not taken into account when calculating returns. This is historical performance data. It should be noted the value of an investment can rise and fall and past performance is not indicative of future performance. The comparison to the RBA Cash Rate is displayed as a reference to the target return for the Master Fund and is not intended to compare an investment in the Master Fund to a cash holding. Loans held by the Master Fund are subject to borrower default risk and as such the Master Fund is of higher risk than an investment in cash.

Portfolio characteristics as at 31 December 2025

Source: Revolution Asset Management. See below for defined terms. These 'forward-looking statements' are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed. Although we believe that the Fund's anticipated future results, performance or achievements expressed or implied by those forward-looking statements are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements.

Funds operated by this manager:

Revolution Private Debt Fund II , Revolution Wholesale Private Debt Fund II - Class B

This material has been prepared by Alphinity Investment Management ABN 12 140 833 709 AFSL 356 895 (Alphinity). It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Any projections are based on assumptions which we believe are reasonable but are subject to change and should not be relied upon. Past performance is not a reliable indicator of future performance. Neither any particular rate of return nor capital invested are guaranteed.