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SUMMARY
- The Portfolio rose 2.3% in June.
- AI-related performance was mixed. Meta and other hyperscalers were pressured by concerns over rising capital expenditure, while ASML benefited from strong demand for semiconductor manufacturing equipment.
- The Portfolio added Spotify, attracted by its scale, personalisation capabilities and growth potential, and exited Genmab, Fabrinet and Vertex Pharmaceuticals.
COMMENTARY
Market Commentary
In US dollar terms, equities declined across all major regions except Europe, where returns were supported by strong gains in Dutch semiconductor equipment manufacturer and index heavyweight ASML. Hong Kong equities fell sharply amid concerns about tighter Chinese regulations aimed at limiting capital outflows. However, the weaker Australian dollar more than offset the underlying market decline, resulting in a 3.0% gain for the index over the month.
The AI trade wavered during the month, with shares in hyperscalers. The large technology companies operating vast cloud and data centre networks are pulling back as concerns about the scale of their capital expenditure resurface. By contrast, many of the “picks and shovels” companies supplying the AI buildout, including ASML, continued to perform strongly. The Energy sector was weighed down by lower oil prices, reflecting improved prospects for a US-Iran agreement and expectations that the Strait of Hormuz would reopen.
Portfolio Commentary
The Portfolio rose 2.3% in June. ASML was the strongest performer, benefiting from robust demand for equipment used in AI semiconductor manufacturing. Relative weakness was concentrated in US technology and communication services holdings. Netflix came under pressure after maintaining, rather than raising, its full-year 2026 revenue guidance, raising concerns that growth may be slowing, while Meta Platforms declined amid investor concerns about the scale of its AI spending.
During the month, we purchased Spotify, the world’s largest music, podcast and audiobook streaming platform, with around 750 million users. Its competitive advantage lies in its recommendation technology, which uses extensive user data to personalise content and improve engagement and retention. We expect future growth to come from new content, including audiobooks and podcasts, as well as tools that help artists connect with audiences and promote their music.
We also exited three holdings: Genmab, due to increasing competition in key areas. Fabrinet, on valuation grounds, and Vertex Pharmaceuticals, due to concerns about its growth outlook.