Strong Results Across Our Core Portfolios
We’re pleased to report that Empire’s three core managed investment portfolios, which form the basis of most client portfolios, delivered strong returns for 2025. The Growth portfolio returned 9.5 percent for the year, Balanced Growth returned 8.59 percent, and Balanced Income returned 8.29 percent, all net of fees and costs. These results represent meaningful wealth creation whilst maintaining the investment characteristics that define each portfolio’s approach.
Each portfolio delivered returns consistent with its construction and objectives. Growth portfolios focus on long-term capital appreciation through quality companies with an emphasis on active management. Balanced Growth portfolios blend growth with stability through genuine diversification across asset classes. Balanced Income portfolios emphasise generating reliable income, particularly through Australian equities that provide franking credit benefits. The returns achieved demonstrate this approach working effectively.
Our Investment Philosophy in Practice
Empire’s approach centres on identifying quality businesses with sustainable competitive advantages – companies with strong balance sheets, defensible market positions, and management teams aligned with shareholder interests. We diversify across strategies, managers, and asset classes, recognising that spreading investments appropriately helps manage risk whilst capturing growth opportunities in different market segments.
This philosophy manifests differently across our three core portfolios. Balanced Income portfolios maintain a structural overweight to Australian equities to maximise franking credit benefits and include higher allocations to income-generating credit strategies. Balanced Growth portfolios, as our most diversified offering, balance allocations across equities, fixed income, infrastructure, alternatives, and property. Growth portfolios concentrate more heavily in equities, including small capitalisation exposure where active managers can identify opportunities that larger investors often overlook.
The 2025 Market Environment
Last year presented an unusual market environment characterised by concentration and momentum. A handful of artificial intelligence companies accounted for a disproportionate amount of global equity market gains, whilst Chinese equities surged after years of weakness. Emerging markets outperformed developed markets for the first time in five years. Within this environment, companies with strong balance sheets and quality business models delivered more modest returns than their higher-risk, more leveraged competitors.
Your portfolio managers maintained their discipline around business quality and governance standards. This meant limited exposure to lower-governance emerging market stocks that led performance, modest positioning in the most expensive AI-related names and continued focus on companies with sustainable competitive advantages. This discipline won’t always mean keeping pace with markets during speculative periods, but it does position portfolios for long-term success rather than chasing short-term momentum.
Performance Across Portfolio Types
The Balanced Income portfolio achieved their 8.29 percent return whilst maintaining income-generation characteristics. Australian equities delivered 12.35 percent for the year, demonstrating the value of the overweight position that maximises franking credits. International equities contributed 13.7 percent whilst our managers maintained their quality-focussed discipline. Fixed income allocations provided stability and distributions, with credit strategies continuing to deliver income as designed. Property holdings contributed diversification whilst generating income independent of equity market dynamics.
The Balanced Growth portfolio demonstrated how diversification manages risk whilst capturing returns. The 8.59 percent annual return reflected contributions across multiple asset classes. Alternative investments, particularly gold, delivered exceptional performance at 20.92 percent for the year, providing genuine portfolio diversification when equity markets concentrated in narrow segments. Australian and international equities both contributed solidly, whilst infrastructure provided stable, income-generating exposure and fixed income contributed portfolio stability.
The Growth portfolio achieved 9.5 percent primarily through equity exposure. International equities advanced 9 percent for the year whilst Australian equities delivered 11.84 percent. Active managers demonstrated their ability to identify opportunities despite challenging market conditions. The small capitalisation allocation faced headwinds as markets favoured speculation over fundamentals, though this remains a segment where skilled managers can generate meaningful alpha over time. Gold contributed strongly at 57.71 percent for the year, enhancing overall returns whilst providing diversification benefit.
Why This Approach Works
Empire’s investment approach draws on decades of research suggesting that quality businesses with sustainable competitive advantages tend to perform well over full market cycles. Markets periodically favour different characteristics – sometimes rewarding speculation and momentum, other times rewarding quality and fundamentals. History suggests speculative phases tend to be temporary, whilst well-managed businesses with genuine competitive positioning deliver more consistent long-term results.
Your portfolio’s construction reflects this evidence. Balanced Income portfolios provide franking credit benefits that compound after-tax wealth whilst maintaining focus on companies with sustainable dividend capacity. Balanced Growth portfolios use diversification across asset classes for genuine risk management, as demonstrated by alternatives performing strongly when equity markets concentrated. Growth portfolios concentrate in quality equities to capture long-term business success, with small cap allocations positioned to benefit when active managers identify opportunities before broader market recognition.
Looking Forward
Your portfolio remains well positioned for continued success. The businesses owned through your fund managers have competitive advantages and financial strength to grow over time. The investment approach we follow – focusing on quality, maintaining appropriate diversification, and avoiding speculation – has proven effective through many different market environments.
When we assess the returns delivered across all three core portfolios, each achieved what it was designed to do whilst positioning you for long-term success. These are solid outcomes that move you toward your financial goals through disciplined adherence to time-tested investment principles.
Thank you for your continued confidence in Empire. If you’d like to discuss your portfolio, please contact us.
