Here is a lightly edited interview between Firstlinks’ James Gruber and Matthew Haupt, Lead Portfolio Manager, Wilson Asset Management.
James Gruber: After the recent dip, what’s your view on the ASX?
Matthew Haupt: What we’ve seen recently is that with tariff uncertainty and inflation expectations going up, there’s been a slowdown in growth expectations. This has led to a large unwinding of crowded positions, especially in ‘momentum’ stocks. This has resulted in big headline falls in indices, but beneath the surface. it’s not as bad. Factors such as quality are dominating the boards as investors change their positioning at the expense of momentum.
We think this is a healthy development and one needed for markets to navigate the large range of outcomes that we are facing.
The two issues that need to be resolved are uncertainty and inflation. Until we get valuations low enough or these resolved at an index level, it will be hard for the market to go higher from here, so expect a few more months of volatility.
JG. You’ve previously suggested that the Big Four banks were overvalued – do you think that’s still the case?
MH: From a historical perspective, the big 4 banks are still overvalued but obviously to a lesser extent now. It’s just hard to make a fundamental case to be long the banks at the moment. Granted, their residential mortgage books are relatively safe through the cycle, and with a lot of commercial and riskier lending in the private space now, you could argue for the likelihood of a lower loan loss cycle for the banks, if the economy goes south.
JG: You’ve talked before about opportunities opening up in the ASX REITs – do you think they’re through the worst of their downturn?
MH: We really like the REIT space, in particular retail, residential, and office. We think the worst is over for the office post pandemic shocks and with tightness in A-Grade coming back. For office exposure, Dexus (ASX: DXS) is screening attractively and with the risk to cap rates falling, you are getting a company with a big discount to net tangible assets (NTA) and no value ascribed to the funds management business.
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Source: Morningstar
In the residential and office space, Mirvac (ASX: MGR) looks like it could emerge as a clear winner. The years of escalating costs and building delays appear over and we think we have seen the lows for margins in this space. Their office exposure will experience the same tailwinds as mentioned for DXS.

Source: Morningstar
For retail, Scentre Group (ASX: SCG) remains our top pick. We believe management is excellent and the assets are world class. And, given no new retail coming online for the foreseeable future, the outlook seems compelling. The ability to exploit air rights over their properties is another interesting angle over the next decade for value to be unlocked for shareholders.

Source: Morningstar
JG: The miners have had a tough few years – are their opportunities here, and if so, which segments are attractive to you?
MH: We like the miners here and think the bottom is in for China, which is the main driver of commodities listed on the ASX. After a five-year program to take the heat out of the property market, China has pivoted and is trying to stabilize and get some growth back in the property market. We have seen multiple stimulus packages and rule changes to get things going again and there’s finally seen some tangible changes on the ground in China.
There could be positive surprises this year which would lead to more interest in deploying capital within China and also beats to expectations in the property sector. We suggest the best way to play this is through the diversified miners, with a preference for RIO over BHP, though valuations for both stocks are undemanding. One of the risks to the miners is a slowdown in global growth, which is something that could outweigh the more positive picture from China.

Source: Morningstar
JG: Many of our subscribers are income investors and I know that you’re launching the WAM Income Maximiser LIC soon – can you tell us more about it?
MH: Sure, we’re launching the LIC (ASX: WMX) after four years of discussions and strong demand from our investor base. WMX will combine equities and bonds in a portfolio with the goal to deliver a high level of fully franked monthly income.
The beauty of combining bonds and equity is the reduction of volatility. This strategy really suits periods of heightened volatility as we are experiencing at the moment.
WMX will be an actively managed strategy and with levers both on the equity, bond and asset allocation side, the goal is to perform strongly in all market environments. The aim of the fund is to take away the risk from equity drawdowns and from interest rate risk from shareholders. We have multiple levers to pull across the cycles from moving within different factor exposures during equity drawdowns to increasing duration before deep interest rate cutting cycles.
With the phasing out of hybrids from the Australian market, we think products like WMX will be sought after, and we’re looking forward to the listing on 30th April.
JG: Can you talk about the types of investments that you’ll invest in?
MH: Within the equity sleeve, we'll have the ASX 300 as a universe. We've got a seven-factor screen to find companies that generate excess free cash and then have the ability to pay it out or reinvest at a high rate of return internally.
So it’s not just a dividend harvesting fund. We've got the flexibility to chase capital growth as well as income in the equity portfolio.
Within the bond sleeve, its core will be subordinated bank debt, so the tier two bank issuances. And then we've got a lot of companies we know over the last couple of decades on the equity side, where we can invest in them on the debt side. Companies like Scentre Group and Ampol (ASX: ALD), and the insurers as well.
JG: Why a LIC rather than an ETF?
MH: Good question. With the LIC structure, you can smooth out dividends. Also, with an ETF, it’s really hard to get the market maker to replicate the bond portfolio.
Another advantage of LICs is franked dividends. You can’t get that with subordinated bonds.
JG: What returns and dividend yields are you targeting with this LIC?
MH: We are targeting a running yield from the securities of WMX of RBA Cash Rate+ 250bps. The remaining distribution will be from realised capital growth which will vary with market conditions. For example, last year the total amount that could have been distributed was 11.97%
The goal of WMX is to get the majority of the distribution covered by income received by underlying securities with the remainder coming from realised capital gains.
Matthew Haupt is Lead Portfolio Manager at Wilson Asset Management.