After a standout year that saw his flagship fund significantly outpace the market, a prominent Perth fund manager is pinpointing the sector he believes will deliver superior returns in 2026.
A Stellar Year Backed by MinRes and Defence
Katana Asset Management's co-founder and portfolio manager, Romano Sala Tenna, guided the firm's Australian Equity Fund to a net gain of 25.25 per cent in 2025. This performance comfortably eclipsed the All Ordinaries accumulated index, which rose by 10.56 per cent.
The Cottesloe-based investment firm enjoyed a bumper year, driven in part by a remarkable turnaround in Mineral Resources (MinRes). Shares in Chris Ellison's company began 2025 around $34, plummeted to near $14 amid operational challenges at its Onslow Iron project and weak lithium prices, before roaring back to finish above $54.
Mr Sala Tenna, a vocal supporter of Mr Ellison, noted that Katana bought into MinRes when it was at the "cheaper end of the market." However, he revealed that the single largest driver of the fund's outsized returns was its early positioning in defence stocks.
Why Defence Stocks Are a Long-Term Play
"We were able to back some quality names in that space, in particular Austal and Electro Optic Systems, the latter of which is still our largest holding today," Mr Sala Tenna said.
The performance of these picks was extraordinary. Electro Optic Systems (EOS), a manufacturer of counter-drone technology, saw its share price skyrocket by 668 per cent in 2025 and has continued its ascent, adding another 17 per cent in early 2026.
Mr Sala Tenna is convinced the rally for high-quality defence companies has further to run, framing it as a solid long-term investment. He cites the ongoing conflict in Ukraine as a major catalyst, forcing European nations to rapidly accelerate their defence budgets.
"We really hope to see a resolution to the Ukraine-Russia War sooner rather than later," he stated. "And even though I think that'd be a short term negative for defence stocks, people will probably look through that pretty quickly and see that the train has left the station."
He believes the "tsunami of money" flowing into global defence from governments will take three to five years to fully wash through the sector.
Trump's Influence and the Outlook for 2026
Adding another layer to the thematic is the potential policy direction of the United States under President Donald Trump. Mr Sala Tenna pointed to a recent, spontaneous tweet from Trump indicating a desire to increase the US defence budget by 50 per cent as a significant tailwind for the sector.
While MinRes was the number two contributor to Katana's 2025 success, the clear focus for the fund's future positioning remains on the defence industry. The combination of sustained geopolitical tensions and expanded fiscal commitments from Western governments has created, in Mr Sala Tenna's view, a multi-year investment opportunity that is only just beginning.
For Australian investors, the insights from one of the top-performing fund managers of the past year highlight a decisive shift towards sectors bolstered by global strategic priorities, with defence leading the charge.
