War time markets & where capital is flowing in a fragmenting world | #49 Michael Frazis

In this episode of The Rate of Change, Murdoch Gatti sits down with Michael Frazis, Founder and Portfolio Manager of Frazis Capital Partners, to discuss the shifting macro landscape and how capital is being deployed in an increasingly fragmented global market.

If you are interested in war time markets, capital flows, artificial intelligence, and how professional investors are positioning portfolios in a changing world, then you will enjoy this conversation.

Markets are no longer being driven by a single narrative. Geopolitics, energy shocks, inflation and technological disruption are colliding — creating a far more complex and uneven investment environment.

In this environment, capital is not flowing evenly.

It is concentrating into specific areas — AI infrastructure, semiconductors, defence, energy and large-scale platform businesses — while other parts of the market, particularly software and consumer-facing sectors, face increasing pressure.

Frazis outlines how this shift is reshaping opportunity sets globally, and how his firm is navigating risk, volatility and changing market regimes through a combination of fundamental insight and quantitative risk management.

Key themes discussed:

• How war time dynamics and geopolitical tensions are actively reshaping global markets and capital flows
• The structural shift away from globalisation towards a more fragmented, multipolar world

• Why capital is no longer flowing evenly — and instead concentrating into specific sectors and themes
• Why energy, commodities and defence are emerging as structural beneficiaries in this environment
• The impact of rising fuel, labour and input costs on consumers and broader market dynamics
• Why Australia, as a commodity exporter, may be relatively well positioned in the current cycle
• The role of currency movements, particularly the Australian dollar, in offshore portfolio returns

• The scale of AI-driven capital expenditure and the infrastructure required to support it
• Why semiconductors and critical bottlenecks (NVIDIA – NVDA, Broadcom – AVGO) sit at the centre of the AI investment cycle
• The broader capex cycle spanning AI, energy, defence and industrial capacity

• The increasing concentration of market returns in a small number of mega-cap companies (Alphabet – GOOGL, Microsoft – MSFT, Amazon – AMZN, Meta – META, Apple – AAPL)
• How passive investment flows are reinforcing these winners while creating dispersion beneath the surface

• The widening divergence between large platform businesses and traditional software companies
• Why parts of software (Atlassian – TEAM, Adobe – ADBE, WiseTech – WTC.AX, Block – XYZ, Salesforce – CRM, GitLab – GTLB) may face structural pressure from AI
• How artificial intelligence is beginning to reshape business models, margins and competitive moats in real time

• Lessons from companies including Costco (COST), Walmart (WMT), Tesla (TSLA), BlackBerry (BB) and DHL Group (DHL.DE) in understanding scale, disruption and durability

• Why this is becoming a true stock picker’s market, with increasing dispersion across companies and sectors
• The growing importance of risk management and portfolio construction in a volatile, late-cycle environment
• How professional investors are positioning portfolios to navigate uncertainty and capture asymmetric opportunities

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