Here’s what you need to know today

• President Trump spoke separately to both Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy, posting on Truth Social that both leaders want peace. Trump plans to negotiate directly with Putin, starting with a summit in Saudi Arabia. Earlier in the day, US Defence Secretary Pete Hegseth said it was “unrealistic” that Ukraine would regain territory annexed by Russia. (ABC News)
  
  

• Chemist Warehouse is now officially an ASX-listed company. The long-awaited merger with Sigma Healthcare went through yesterday and the combined stock rocketed up 9% in the morning before settling around 5% up for the day. The combined healthcare giant is worth $32 billion. (AFR)
  
  

• Qantas shares have been on a tear recently, up more than 60% over the past 12 months. However, they fell back 3% yesterday after analysts at Macquarie downgraded their outlook for Australia’s largest airline in the face of greater international competition. (Capital Brief)
  
  

• Melbourne’s CBD has been battered since COVID, with office vacancy rate at 18% in January. So Melbourne real estate agents were cheering yesterday when Coles announced it would be moving from its suburban headquarters in Hawthorn East to a building in the CBD. (AFR)
  
  

• US inflation rose faster than expected in January, up 3% year-on-year. This is a slight uptick from 2.9% in December. Inflation remaining above the US Federal Reserve’s target of 2% will mean the Fed keep interest rates steady, thwarting Trump’s calls to see more cuts. (Capital Brief)
  
  

• A key contributor to that inflation number was the price of eggs, which rose 15% as the US battles a bird flu outbreak that has seen millions of birds killed, grocery stores limiting cartons per customer and restaurants adding egg surcharges. (CBS News)
  
  

• Oil giant Chevron has said it would cut 15-20% of its workforce in an effort to save $3 billion a year in costs. The decision could affect up to 9,000 employees and comes after the company reported a fourth-quarter loss for the first time since 2020. (Bloomberg)

What the…?

If you’ve ever been to Japan, you know there are some snacks that are different to what you’ll find on grocery shelves at home. Yet, this was pushing it. Smugglers tried to disguise giant beetles as Japanese snacks in an effort to get them through customs at the Los Angeles International Airport.

Packages intended to resemble Japanese chips, chocolate and other snacks actually included live 15cm long stag beetles crawling around inside. Nightmare fuel. Don’t think about this story next time you open a packet of chips. (Popular Science)

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Investing is a lifelong journey

Here’s what you can learn today.

Best small-cap manager in Australia

Community Question from Hugh: Who is the best small-cap manager in Australia and why? Or, should I just use a small-cap ETF?

We put this question to Luke Laretive, financial adviser and founder of Seneca Financial Solutions

I definitely wouldn’t use a small-cap ETF. The way the Small Ordinaries Index is constructed (it’s the ASX300 but excluding the ASX100, so company #101 to 300, by market cap) means that at the lower market cap end, fairly ordinary companies (no revenue, a lot of hype) are often included in the index. At the top end, those large caps that are permanently disrupted fall out of the top 100 and become heavy Small Ordinaries index weights.

Who is the best small-cap manager in Australia? It depends on what your definition of “best” is. The managers with the best historical returns and most clients/funds under management? Well, actually, the data shows that the bigger a small cap fund gets, the worse the performance gets – so the most well-known and “successful” small cap managers with the best historical returns are probably the worst place to invest your money.

In active management, outperformance is cyclical. Most quality fund managers have a distinct style or set of principles that sometimes cause underperformance, and at other times, this style generates amazing outperformance. It’s really the sum total of those periods, from the time you invest (not in the past!), to the time you realise your investment that matters.

When selecting a fund manager, you need to have a clear understanding of the drivers of outperformance and whether in the forward period, those drivers are likely to result in a period of above-average performance. This is the sort of work we do when selecting managers each month across our suite of managed accounts – hopefully resulting in our clients investing with managers who not only historically have generated outperformance, but are likely to continue to do so.

Interested in speaking to a financial adviser? Fill out the form on our website and we’ll match you with one of our hand-picked financial advisers.

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