The decisions Dion Hershan is making now that could set up portfolios for a decade

Click on the player to listen to the podcast or read a summary below. Please note, this interview was recorded on Thursday, 12 March 2026.

Investing has never been a pursuit for the faint-hearted, but periods of intense uncertainty like we're living through now test even the most seasoned players. Like a war being fought on multiple fronts, markets are currently grappling with several competing forces. Artificial intelligence is reshaping industries. Geopolitical tensions are driving volatility in energy markets. And in Australia, elevated valuations and concentration in parts of the equity market are forcing investors to think carefully about where to deploy capital safely. 

For Dion Hershan, Executive Chairman and Head of Equities at Yarra Capital Management, moments like this are precisely when discipline matters most.

“If you want to panic, there’s plenty of opportunities to panic. But we’re also in an environment where people are so fixated on macro topics that many of the micro changes are actually getting ignored.”

That distinction between noise and opportunity has shaped Hershan’s approach through multiple market cycles, from the tech wreck to the global financial crisis.

In fact, he believes the decisions investors make during periods like this often matter more than those made in calmer markets.

“A few important decisions can set up a portfolio for a decade.”

In the latest episode of The Rules of Investing, Hershan explains how he is navigating the current environment, why the rise of passive investing is creating new opportunities for active managers, and where his team is finding value today.

Keeping your head when markets lose theirs

Periods of market stress can feel unprecedented, but Hershan believes they often follow a familiar pattern. He describes the current environment as something of a “sliding doors” moment for investors. Several major macro forces are colliding at once, including AI disruption, geopolitical tensions in the Middle East and sharp moves in energy markets. Any one of those factors could move markets on its own. Together, they create a backdrop that amplifies uncertainty and fuels exaggerated narratives.

“Every crisis is different, but they all have a start and they all have an end. When you’re in the midst of the storm, most people don’t actually realise these things will pass.”

History, even recent history, can provide useful context. 

“If you were caught in the eye of the storm and responded to everything that happened during the tariff tantrum last year, you would have made some extraordinarily big mistakes.”

For Hershan, the lesson is simple: investors must remain measured, avoid reacting emotionally to headlines, and focus on what they can actually know.

Why volatility creates opportunity

Whilst the saying 'volatility creates opportunity' might sound trite, when you've lived through previous market epochs and, more importantly, have developed a playbook for taking advantage of opportunities, the words take on new meaning. 

Across his career, Hershan has witnessed numerous crises, each of which eventually created attractive entry points for what he calls 'patient capital'.

“Look at what you could have bought during the lockdown crisis. Look at what you could have bought during the GFC", he posits. 

When investors become consumed by macro fears, they often overlook the changes taking place within individual businesses. That can lead to significant mispricing. For long-term investors, those moments are often the most rewarding.

Passive flows and momentum markets

One structural force shaping modern markets is the continued rise of passive investing. Hershan does not believe that trend will reverse.

“Love it or hate it, passive is going to be an ongoing feature of our market.”

However, he argues the dominance of passive strategies, along with closely related quant and high-frequency trading, is amplifying market momentum. When flows push money into certain stocks or sectors, prices can move well beyond what fundamentals alone might justify. That dynamic can work both ways.

“If more of the market becomes a momentum market, when momentum breaks we won’t see small corrections in stocks or sectors. We’ll see violent ones.”

For active managers, this creates opportunities to identify companies whose fundamentals diverge from the prevailing narrative.

Two forces dominating markets

According to Hershan, two themes are currently dominating investor thinking: energy prices and artificial intelligence. On energy, he believes markets may be overestimating the long-term impact of geopolitical tensions. Oil prices have surged amid concerns about disruptions to supply routes, but Hershan points out that the underlying supply-demand balance had actually been weak only weeks earlier.

“Oil was oversupplied a month ago. What we’re seeing now is a typical geopolitical premium in the oil price.”

History suggests these shocks often prove temporary. Futures markets are already indicating that prices could normalise within months rather than years. 

Technology and AI present a different challenge. Just six months ago, investors believed AI would be overwhelmingly positive for software companies. Today, some fear it could destroy the sector. 

Hershan believes the reality is likely far more nuanced. As he points out, software exists to automate tasks and improve productivity, and AI could ultimately expand that opportunity rather than diminish it. That shift in sentiment has already created opportunities.

Where Yarra is finding value

Yarra’s portfolios remain focused on bottom-up stock selection rather than macro forecasting. One area where the firm continues to see strong opportunities is resources. The team has been significantly overweight the sector for several years, particularly in companies linked to structural demand themes such as copper and rare earths. 

At the same time, Hershan says the team has recently begun adding selectively to technology stocks following sharp price declines. The firm is also investing in turnaround situations where operational improvements could unlock value independent of broader economic conditions.

Companies such as Ramsay Healthcare (ASX: RHC) and TPG Telecom (ASX: TPM) fall into that category, with management actions and strategic shifts expected to drive stronger long-term returns. 

Hershan also believes investors may be overlooking improving fundamentals within parts of the property market, particularly among real estate investment trusts where occupancy and rental growth have begun to recover.

The decisions that matter most

When asked which company he would hold if markets closed for the next five years, Hershan nominated data centre operator NextDC (ASX: NXT). The investment case reflects the rapid growth in data consumption and the infrastructure required to support artificial intelligence.

“Australia’s under-served from a data centre perspective, and based on the capacity they’re building the business could be ten times its size in a decade.”

While expansion will require significant capital, Hershan believes the long-term demand for digital infrastructure remains compelling. 

Looking ahead

Markets may feel unusually uncertain today, but Hershan sees familiar patterns beneath the noise. Periods dominated by macro headlines and investor panic often obscure the more important changes taking place within individual companies. For investors willing to stay calm and focus on fundamentals, those moments can prove the most rewarding.

“The types of decisions you make in environments like this can often be the ones that set up a portfolio for five to ten years.”