How Katana Capital Outperformed the ASX with a 10.63% Return in FY2025

Navigating a Volatile Year

Katana Capital Limited has released its FY2025 investment report, revealing a solid gross investment return of 10.63%, outperforming the All Ordinaries index by 1.16%. This result comes amid a challenging macroeconomic backdrop marked by persistent inflation, aggressive interest rate hikes, and geopolitical tensions that unsettled global markets.

The fund’s defensive positioning, favouring high-quality, cash-generative companies in sectors such as resources, infrastructure, and communications, provided resilience during periods of market volatility. This approach, combined with a disciplined focus on valuation and long-term thematic alignment, allowed Katana to sidestep some of the more severe market drawdowns.

Drivers of Performance

Among the top contributors to the fund’s outperformance were Technology One, Life360, Electro Optic Systems, GenusPlus Group, and ResMed. These companies were selected for their strong fundamentals, secular growth trends, and clear valuation upside. Technology One’s dominance in enterprise software and Life360’s growth in consumer safety technology stood out, while Electro Optic Systems benefited from rising defence contracts amid geopolitical tensions.

Conversely, the fund faced headwinds from holdings such as Mineral Resources and Whitehaven Coal, which were impacted by commodity price corrections and project funding pressures. Domino’s Pizza Enterprises and CSL Ltd also detracted due to operational challenges and currency headwinds, respectively. Despite these setbacks, the fund maintained or increased positions in these companies, reflecting confidence in their medium-term prospects.

Structural Market Shifts and Outlook

The report highlights an unprecedented valuation surge in Australia’s big four banks, driven largely by industry superannuation fund flows and momentum investing. Katana cautions that this may represent a ‘bank bubble’ and notes the structural shift toward large-cap companies trading at higher valuations. Meanwhile, value and mid-cap stocks remain attractively priced, offering opportunities for patient investors.

Looking ahead to FY2026, Katana anticipates a more constructive environment as inflation peaks and the Reserve Bank of Australia enters a monetary easing cycle. The fund expects earnings growth to moderate, with a premium placed on quality, defensiveness, and cash flow visibility. Sectors such as healthcare, infrastructure, and consumer staples are poised to benefit, while resource markets face a mixed outlook amid shifting global demand.

Katana’s strategic approach remains grounded in fundamental valuation and long-term thematic conviction, supported by a diversified portfolio and a patient capital deployment philosophy. The fund’s recent share buyback and fully franked dividends underscore its commitment to shareholder value.

Conclusion

Katana Capital’s FY2025 results validate its disciplined investment process in a complex market environment. By avoiding momentum traps and focusing on intrinsic value, the fund has delivered consistent outperformance. As FY2026 unfolds, the fund’s emphasis on quality and valuation discipline positions it well to navigate ongoing uncertainties and capitalize on emerging opportunities.