Morgan Stanley operates as a global financial services company. The firm provides investment banking products and services to its clients and customers including corporations, governments, financial institutions, and individuals. It operates through the following segments: Institutional Securities, Wealth Management, and Investment Management. The Institutional Services segment provides financial advisory, capital-raising services, and related financing services on behalf of institutional investors. The Wealth Management segment offers brokerage and investment advisory services covering various types of investments, including equities, options, futures, foreign currencies, precious metals, fixed-income securities, mutual funds, structured products, alternative investments, unit investment trusts, managed futures, separately managed accounts, and mutual fund asset allocation programs. The Investment Management segment provides equity, fixed income, alternative investments, real estate, and merchant banking strategies. The company was founded by Harold Stanley and Henry S. Morgan in 1924 and is headquartered in New York, NY.
COMMENTARY
Market Review
Global equity markets declined in December, with factor rotations weighing on growth-oriented stocks despite easing volatility and a more supportive monetary policy backdrop. Economic data released following the conclusion of the US government shutdown was broadly constructive, reinforcing expectations that inflation pressures continue to moderate while growth remains uneven. A weaker US dollar detracted from returns in Australian dollar terms.
In the United States, November core inflation slowed to 2.6% year-on-year, below expectations and down from earlier levels. Labour market data remained neutral, while purchasing managers’ indices showed a slowing expansion in services activity and subdued but stable manufacturing conditions. Housing indicators remained soft, with pending home sales declining modestly and price growth decelerating. Against this backdrop, the Federal Reserve reduced interest rates by 25 basis points during the month.
Elsewhere, economic conditions remained mixed. In Europe, construction output improved modestly, while investor confidence strengthened, although consumer sentiment remained subdued. Inflation remained contained across the region. In China, growth continued to diverge, with exports rebounding strongly while domestic consumption and property investment remained under pressure.
Despite subdued and uneven global growth, monetary policy remains broadly supportive across major regions. In this environment, Axiom remains focused on companies exhibiting positive operating momentum and improving fundamentals, where dynamic earnings growth and ongoing earnings revisions are expected to remain key drivers of long-term returns.
Portfolio Commentary
The Fund underperformed the benchmark in December. At the sector level, underweight exposure to consumer staples contributed positively, while overweight positions in information technology and communication services detracted as market leadership rotated away from growth-oriented exposures. Portfolio sector positioning was broadly unchanged, with the largest overweights remaining information technology and communication services, and the largest non-exclusionary underweights in financials and consumer staples.
At the stock level, AppLovin, a digital advertising and app monetisation platform, was the strongest contributor following favourable industry feedback on its new e-commerce advertising offering. Early adoption accelerated into the holiday period, supporting confidence in medium-term revenue potential. Siemens Energy, a provider of power generation and grid infrastructure equipment, also performed strongly as expectations for turbine orders, revenue growth and margins continued to improve after its Capital Markets Day. Morgan Stanley contributed as a steeper yield curve and improving expectations for capital markets activity supported earnings outlooks.
After being a leading contributor in November, Broadcom consolidated following its earnings release, which fell short of elevated expectations. Management’s disclosure of a $73bn AI order backlog created initial uncertainty around revenue timing, although subsequent clarification and positive earnings revisions supported confidence in the medium-term outlook. Netflix detracted following the announcement of a proposed acquisition of Warner Bros Discovery, raising concerns around valuation, dilution, and strategic complexity, resulting in a significant reduction in the position. Sony Group was weaker amid geopolitical tensions and rising memory prices, although management confirmed current-year earnings are insulated from these pressures.
Portfolio activity was focused at the stock level. The Fund added to ASML, TJX Companies and Alphabet, reflecting confidence in improving industry conditions, continued operational outperformance and accelerating generative AI adoption. Reductions were made to Netflix, Oracle and ServiceNow, reflecting acquisition uncertainty, concentration risk and valuation discipline.
Three new positions were initiated during the month. AerCap Holdings, the world’s largest aircraft lessor, benefits from strong demand and constrained aircraft supply, supporting lease yields and capital returns. Danaher is emerging from a period of inventory digestion, with accelerating revenue growth not yet reflected in forecasts. AstraZeneca was added, given the underappreciated growth in its oncology and cardio-metabolic franchises. The Fund exited Equinix, reallocating capital toward healthcare exposures and reducing overall factor risk.
There were no changes to the MSCI ESG rating during the month. Engagement activity included discussions with Amazon, Nvidia, Siemens Energy and TSMC, focusing on emissions disclosure, supply chain practices, human capital management and governance frameworks.