Equity Markets continue to strengthen

• Global equity markets strengthened in March as interest rate expectations fell
• The global economy remains relatively stable, supported by China’s continued re-opening
• The Portfolio returned 5.4% in March, while the benchmark returned 2.4%

Some thought pieces from our investment team

Top Holdings (alphabetically)

Apple

United States

Information Technology

Apple Inc. designs, manufactures, and markets personal computers and related personal computing and mobile communication devices along with a variety of related software, services, peripherals, and networking solutions. Apple sells its products worldwide through its online stores, its retail stores, its direct sales force, third-party wholesalers, and resellers.

Asml Holdings

Netherlands

Information Technology

ASML Holding N.V. develops, produces, and markets semiconductor manufacturing equipment, specifically machines for the production of chips through lithography. The Company services clients worldwide.

Danaher

United States

Health Care

Danaher Corporation designs, manufactures, and markets professional, medical, industrial and commercial products, and services in the sectors of test and measurement, environmental, life sciences, dental, and industrial technologies.

Eli Lilly & Co

United States

Health Care

Eli Lilly and Company discovers, develops, manufactures, and sells pharmaceutical products for humans and animals. The Company products are sold in countries around the world. Eli Lilly products include neuroscience, endocrine, anti-infectives, cardiovascular agents, oncology, and animal health products.

Hermes International

France

Consumer Discretionary

Hermes International designs, produces, and distributes personal luxury accessories and apparel. The Company operates a chain of boutiques under the Hermes name that sells items such as leather, scarves, men's clothes, ties, women's fashions, perfume, watches, stationery, shoes, hats, gloves, and jewelry products.

Microsoft

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.

Novo Nordisk

Denmark

Health Care

Novo Nordisk A/S develops, produces, and markets pharmaceutical products. The Company focuses on diabetes care and offers insulin delivery systems and other diabetes products. Novo Nordisk also works in areas such as haemostatis management, growth disorders, and hormone replacement therapy. The Company offers educational and training materials. Novo Nordisk markets worldwide.

NVIDIA Corp

United States

Information Technology

NVIDIA Corporation designs, develops, and markets three dimensional (3D) graphics processors and related software. The Company offers products that provides interactive 3D graphics to the mainstream personal computer market.

ServiceNow Inc

United States

Information Technology

ServiceNow, Inc. provides enterprise information technology (IT) management software. The Company designs, develops, and produces prepackaged computer software, cloud services, and IT service management platform. ServiceNow serves customers throughout the United States.

Visa Inc

United States

Financials

Visa Inc. operates a retail electronic payments network and manages global financial services. The Company also offers global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities.

Global equity markets strengthened in March as investors turned their attention to hopes of an early peak in interest rates. The MSCI All Country World Index AUD (Hedged) gained 2.4%. The Fund outperformed the benchmark by 3.0% in Australian dollar terms as growth stocks outperformed value.

US inflation continued to trend down, falling to 6.0% year-on-year in February from 6.4% in January. Economic growth trends remained consistent with those seen in February as purchasing managers’ data improved across the major economies.

China’s manufacturing sector appeared to stagnate in March following modest expansion in February, while services continued to grow strongly. This reflects the country’s pivot towards a more consumer-orientated economy, which is driving the recovery. China continues to make strong progress on re-opening the economy, which is supporting investor sentiment.

The Fund retains its focus on dynamic growth stocks. Positive revisions to earnings-per-share (EPS) can continue to drive outperformance as the economy moves into a period of weaker overall earnings growth. The Fund continues to overweight information technology, consumer discretionary, and health care while underweighting financials, energy, and materials.

Positive stock selection in financials, consumer discretionary, and industrials, the underweight in financials, and the overweight in information technology contributed to relative returns. Negative stock selection in materials and the underweight in communication services were the main detractors. Overweight positions in Hermes, Novo Nordisk, and ASML were the strongest contributors to relative performance, while overweight positions in Ameriprise and Albemarle and the underweight in Apple were the most significant detractors.

France-based luxury good house Hermes contributed to relative returns when it continued to outperform in March. This reflected its exposure to China’s recovery and the strong demand for luxury goods more broadly. Earnings estimates continue to be revised upwards following its fourth quarter results, bringing potential for further earnings improvements.

Danish global pharmaceutical company Novo Nordisk focuses on the manufacturing and marketing of diabetes and obesity medications. It outperformed again in March, contributing to relative returns. This followed strong weekly sales data, leading to continued upwards revisions to earnings estimates for 2023 and beyond.

The holding in US-based retirement planning provider Ameriprise detracted from relative returns in March when it underperformed the market. This reflected negative sentiment towards the broader financial sector following the recent banking uncertainty.

The Fund’s underweight position in US-based global technology group Apple detracted from relative returns when it outperformed in March. There was a significant allocation of assets away from banks into large technology groups, reflecting their defensive properties, strong balance sheets, and undemanding valuation levels.

The Fund’s sector allocation was broadly unchanged during the month. It continued to increase exposure to semiconductor companies including Nvidia, Taiwan Semiconductor Manufacturing Company, and STMicroelectronics upon expectations of rising demand. Whilst not currently exposed to traditional banks, the Fund further reduced exposure to financials as the broader sector is expected to remain under pressure.

The Fund exited its position in Chinese e-commerce company JD.com during March after it published a disappointing earnings report. It forecast no immediate revenue growth as it pivots to a lower-priced strategy in the face of increasing competition.

In March the Fund engaged with US-based global entertainment company Live Nation. This followed concerns around its ticketing processes which attracted the attention of regulators and legislators. The company is now proactively engaging with legislators to better explain its economic model. It confirmed that regulatory issues remained the greatest investor concern, although an early resolution was unlikely. While the company’s transparency was appreciated, the ongoing ESG risk led to the Fund reducing its holding.