By David Rogers
Six months ago, Shaun Weick was saying the easy money in small caps was over.
He was right about the index.
After rising 23 per cent by late January, the small cap benchmark finished the financial year up 5.5 per cent after being hit by interest rate rises, oil prices and the federal budget.
But WAM Active’s investment portfolio rose 75.5 per cent in the 12 months to 30 June.
It’s the best result since the fund was launched in January 2008, and a staggering 71.6 percentage points ahead of its benchmark All Ordinaries Accumulation Index, which rose just 5.7 per cent.
Weick, a portfolio manager for WAM Active, says the result was built on four themes: critical minerals, electrification and grid infrastructure, precious metals and artificial intelligence, and on the team’s willingness to move quickly when the picture changed.
Early in the year the markets were pricing in three rate cuts for calendar 2026. By October, that had flipped to three rises.
That shift made Weick cautious about the interest rate-sensitive small industrials – the domestic-facing companies which had disappointed investors throughout 2025 – and sent him hunting elsewhere.
He found it first in gold. At the peak, about 25 per cent of the fund was in gold stocks.
“We really liked the macro set-up at that time,” Weick tells The Australian.
But by January into February he saw signs of euphoria in the gold market.
As the war in the Middle East escalated and hawkish implications for the US interest rate outlook, the decision was made to reduce exposure. Gold, at least in the short term, had its blow-off top.
Cash levels peaked at 35.5 per cent in February, coinciding with a $70.7m entitlement offer that was oversubscribed. The fund’s mandate is unrestricted, and it can reach 50 per cent cash in about a week.
“This flexibility allows us to protect capital in more uncertain environments and deploy cash quickly as opportunities emerge,” Weick says.
The fund later reduced its cash to a couple of per cent as it fully committed to its best ideas.
The main rotation from gold was into copper.
The logic was simple: building out AI data centres and electrifying the grid needs vast amounts of copper. The fund went beyond the obvious names like Capstone and Sandfire, digging into smaller plays such as Cobre and Solstice Minerals which appears to have found a significant deposit in WA.
Battery energy storage was another angle as China’s battery exports grow 55 per cent per annum. Rare earths were a standout performer. Top holdings Lindian Resources and Viridis Mining rank among the world’s top-quartile projects. Meanwhile, the race to loosen China’s grip on the sector is accelerating.
China controls roughly 90 per cent of rare earth processing globally, feeding critical industries in defence and technology.
“That’s where all the battles are being fought now and will be fought going forward,” Weick says.
Defence stocks also contributed at various points; Electro Optic Systems, DroneShield, Elsight and Codan all featured in the portfolio. But the AI theme was the hardest to navigate, and the most important to get right. Through late January and all of February, new AI tools targeting specific industries – travel, insurance broking, coding, legal services – were announced in rapid succession.
“The majority of those stocks haven’t recovered,” Weick says.
Insurance brokers that once traded on 22 to 25 times earnings now sit on 12 or 13 times.
The task was to avoid those falling knives while rotating towards genuine AI beneficiaries.
The winners were businesses deploying AI to solve real, measurable problems.
ECHOiQ is now the fund’s second-largest holding at 10.1 per cent. It has built the world’s largest echocardiogram database of more than 20 million records and uses it to train AI cardiac diagnostic tools. It has America’s FDA approval for its aortic stenosis module, and a heart failure algorithm close behind. Pro Medicus recently invested $20m and signed a distribution agreement. “We think they can still be a 10-bagger from here over time,” Weick says.
The portfolio turned over at roughly seven to eight times during the year, meaning the $200m fund was effectively transacting about $1.4bn annually. “We’re not just sitting there buying, holding and hoping things come good,” Weick says. “We try as best we can to skate where the puck is going.”
Getting that right required clear thinking about geopolitics.
“A lot of it is thinking about the game theory of the situation and trying to understand different people’s incentives,” he says.
The fund’s total shareholder return, including dividends, was 40.2 per cent.
Shareholders will receive total fully franked dividends of 9.4c per share for the year – including a 3c special dividend – representing a gross yield of 12.9 per cent.
Looking ahead, Weick expects resources to carry the market through the August reporting season. The domestic consumer is under pressure as the budget, rate rises and falling house prices are all biting.
But the AI capex cycle remains intact. Recent selling looked like an over-reaction.
“The market jumped at shadows,” Weick says. “This is still early stages.”
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