“We’ve been preparing ourselves for this for five years”: Soul Patts' Todd Barlow

You can always count on Todd Barlow to say something impactful about the state of markets.

Addressing the elephant in the room, the Chief Executive of Soul Patts (ASX: SOL) didn’t hold back on his thoughts about the ructions being caused by the crisis in the Middle East on markets, oil and inflation during the company’s 1H26 earnings call.

“I think it’s a very difficult time, but this is the environment that we’ve been preparing ourselves for for five years," Barlow said.

"We’ve been saying for five years now we’re going to broaden our portfolio, we’re going to add uncorrelated assets, we’re going to increase the diversification, and we're going to remain defensive.”

That playbook allowed SOL to bump its dividend by 9.1% in the first half, marking 28 consecutive years of dividend increases.

Cash is King

Barlow had repeatedly warned that complacency was brewing for years. Investors were chasing growth assets at rich valuations, and those who built big positions in hot pockets of the market like ASX software stocks are now feeling the pain.

“We were already at a point where we were late in the cycle. Asset prices were fully valued - so it was a pretty tough environment but it only got worse with the oil price shock and inflation, which was already present, is being added to.”

“We’re in a period of peak uncertainty, and even before the war, every day or every week, we were reading about some industry that was going to be disrupted by AI."

That’s why Barlow and Chairman Robert Millner have, over the years, extolled the benefits of having liquidity and managing SOL’s portfolio in a way where cash generation, which soared 15.4% to $334 million during the period, has become the north star.

The company is sitting on a tidy $472 million of cash in the bank, which Barlow is prepared to deploy as opportunities arise.

100% equities? No thanks

While there’s always temptation to go chase listed equities, Barlow said he wants Soul Patts to be a company whose asset value doesn’t move with the ebb and flow of equity markets, but rather is underpinned by a diversified set of uncorrelated strategies.

In 1H21, the company invested $4.8 billion in shares and around $400 million in unlisted assets. Its ~$14 billion in assets now is split 50-50 between the two.

One area he’s keen to grow further is SOL’s private credit book, which provides stability, reliability and returns that often exceed what equity markets can provide.

But he pushed back against suggestions that adding more credit exposure diminishes liquidity, stressing that the investment house has achieved a good balance.

“It would be silly for us to give up on the advantage we have with our firm’s capital and give away that premium [we gain from] illiquidity by having the whole book capable of being liquid. So we’ve been thoughtful about it,” he says.

That being said, Barlow said that Soul Patts is looking to broaden out its listed book, with emerging markets being a key area of interest.