September Report

• Global share markets finished higher in September, as inflation continued to moderate across developed economies.
• This enabled interest rates to start falling in the US and to move further down in the Eurozone.
• The Fund returned -0.1% in September, while the benchmark returned +0.1%, as a weaker US dollar detracted from global equity returns in Australian dollar terms.

Join Portfolio Manager Rick Schmidt for a webinar update where he will discuss the current portfolio holdings, factors influencing recent performance, and some of the market variables the investment team is considering moving forward. Register here.

Top Holdings (alphabetically)

Alcon Inc

United States

Health Care

Alcon, Inc. engages in the development, manufacture, and marketing of market surgical equipment and devices, pharmaceutical eye drops, and consumer vision care products to treat eye diseases and disorders. It operates through the following segments: Surgical and Vision Care. The Surgical segment offers implantable products, consumables and equipment for use in surgical procedures to address cataracts, vitreoretinal conditions, refractive errors, and glaucoma. The Vision Care segment comprises daily disposable, reusable and color-enhancing contact lenses, as well as portfolio of ocular health products, including over-the-counter products for dry eye, contact lens care, and ocular allergies, as well as ocular vitamins and redness relievers. The company was founded by Mr. Robert Alexander and Mr. William Conner on 1945 and is headquartered in Geneva, Switzerland.

Alphabet Inc

United States

Communication Services

Alphabet Inc. operates as a holding company. The Company, through its subsidiaries, provides web-based search, advertisements, maps, software applications, mobile operating systems, consumer content, enterprise solutions, commerce, and hardware products.

Amazon.com Inc

United States

Consumer Discretionary

Amazon.com, Inc. is an online retailer that offers a wide range of products. The Company products include books, music, computers, electronics and numerous other products. Amazon offers personalized shopping services, Web-based credit card payment, and direct shipping to customers. Amazon also operates a cloud platform offering services globally.

Meta Platforms Inc

United States

Communication Services

Meta Platforms, Inc. operates as a social technology company. The Company builds applications and technologies that help people connect, find communities, and grow businesses. Meta Platform is also involved in advertisements, augmented, and virtual reality.

Microsoft Corp

United States

Information Technology

Microsoft Corporation develops, manufactures, licenses, sells, and supports software products. The Company offers operating system software, server application software, business and consumer applications software, software development tools, and Internet and intranet software. Microsoft also develops video game consoles and digital music entertainment devices.

Netflix Inc

United States

Communication Services

Netflix, Inc. engages in providing entertainment services. It also offers activities for leisure time, entertainment video, video gaming, and other sources of entertainment. It operates through the United States and International geographic segments. The company was founded by Marc Randolph and Wilmot Reed Hastings on August 29, 1997 and is headquartered in Los Gatos, CA.

Schneider Electric SE

France

Industrials

Schneider Electric SE manufactures electrical power products. The Company offers car chargers, home security goods, light switches, access control, sensors, valves, circuit breakers, cables, accessories, signaling devices, fuse, motor starters, and voltage transformers. Schneider Electric serves customers worldwide.

Tencent Holdings Ltd

Hong Kong

Communication Services

Tencent Holdings Ltd. provides value-added services, online advertising services, and fintech and business services. It operates through the following segments: Value-Added Services, FinTech and Business Services, Online Advertising, and Others. The Value-Added Services segment is involved in online and mobile games, community value-added services, and applications across various Internet and mobile platforms. The FinTech and Business Services segment offers fintech and cloud services, which include commissions from payment, wealth management and other services. The Online Advertising segment refers to the display based and performance-based advertisements. The Other segment is composed of trademark licensing, software development services, software sales, and other services. The company was founded by Yi Dan Chen, Hua Teng Ma, Chen Ye Xu, Li Qing Zeng, and Zhi Dong Zhang on November 11, 1998, and is headquartered in Shenzhen, China.

Thermo Fisher Scientific Inc

United States

Health Care

Thermo Fisher Scientific, Inc. manufactures scientific instruments, consumables, and chemicals. The Company offers analytical instruments, laboratory equipment, software, services, consumables, reagents, chemicals, and supplies to pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions, and government agencies.

Vertex Pharmaceuticals Inc

United States

Health Care

Vertex Pharmaceuticals Incorporated discovers, develops, and commercializes pharmaceutical products. The Company develops drugs for the treatment of cystic fibrosis, cancer, inflammatory bowel, autoimmune disease, and neurological disorders. Vertex Pharmaceuticals serves healthcare sector worldwide.

Market Review 

Global share markets finished September higher in local currency terms, with most sectors and regions posting gains. US inflation showed further signs of heading back to the Federal Reserve’s (Fed’s) 2.0% target during the month. This enabled the central bank to shift its focus to the second component of its mandate, that of maximising employment. The Fed duly cut its interest rate by 0.5% to 4.50% – 5.00% in September to support the labour market. The European Central Bank also lowered rates, delivering its second cut in three months to support the region’s faltering economy.

China unveiled a sweeping package of monetary stimulus measures aimed at reducing borrowing costs and boosting credit availability. Key measures included lowering the minimum down payment on mortgages to 15%, to stabilize the struggling residential real estate market. The creation of a new lending pool to encourage share buybacks and enable asset managers to buy more domestic stocks, was also announced. Additionally, China’s government promised it would shortly support monetary easing with fiscal support. This brought a strong improvement in market sentiment, which resulted in the MSCI China Index soaring more than 20% in just two weeks during late September. This was its strongest performance in more than a decade.

Despite escalating tensions in the Middle East, oil prices fell upon growing expectations that the OPEC+ group of oil exporters will increase production later this year. It also reflected market rumours that Saudi Arabia may abandon its US$100 per barrel price target.

Portfolio Commentary

Countries that are home to almost half of the world’s population will have held national elections in 2024. By the time of our next report, we will (likely) know the result of the one which is most significant to global equity markets, the November US presidential election. It may bring policy shifts which have implications for the global economy, in particular the US share market, in which 60% of the Fund is invested. The result remains finely balanced, with any policy changes and their impact on regions, sectors or stocks even more uncertain. Nonetheless, the Portfolio Managers have carefully analysed the risks and remain confident the Fund is appropriately positioned for any outcome.

Throughout the year, the Fund has continued to reduce its exposure to stocks which are valued on higher multiples of earnings, particularly in the US. The proceeds have been reinvested into high-quality businesses (those with strong balance sheets and positive cash flows) that we believe can grow earnings under any economic or market environment which may lie ahead.

This leaves the Fund with an underweight position to the US relative to the index. It is possible that the election aftermath gives rise to undue market volatility, leaving high-quality businesses more attractively valued. In such circumstances the Fund will take advantage of opportunities to increase its weightings to US quality growth companies at more reasonable price levels.

The Fund is focussed on identifying great companies through bottom-up analysis and continues to find exciting opportunities in health care, communications services and industrials, in which it maintains overweight positions.

Strong stock performance in financials, health care and communications services, an overweight position in communications services and an underweight to energy boosted relative returns in September. This was offset by an overweight position in health care and weaker stock performance in consumer discretionary.

One of the strongest contributors to relative returns in September was the Portfolio’s overweight position in Hong Kong-based pan-Asian life insurance group AIA Group. It outperformed upon stronger investor sentiment towards the broader China share market and hopes that the stimulus measures will support consumer demand in the life insurance sector.

Germany’s leading online real estate portal Scout24 outperformed after real estate advertising company REA Group increased its bid to acquire the leading UK property portal Rightmove. The move highlighted the attraction of the European online property listing industry and fed speculation that Scout24 may itself become an acquisition target.

Japan-based entertainment and electronics group Sony underperformed after its internally developed online game Concord failed to generate the expected user interest. Furthermore, the launch of Grand Theft Auto 6, which has been highly anticipated by gamers and which was expected to drive Sony’s hardware sales and live services revenues next year, was delayed until 2026.

Brazilian clearing house and stock exchange operator B3 underperformed amid a broad decline in Brazilian share prices during September. This followed the country’s central bank raising interest rates in response to a robust labour market and rising wage pressures.

There were no positions established or exited during September.