Australian Shares Fund
The Australian Shares Fund (Fund) declined by 9.2% during the March quarter, compared with a benchmark fall of 4.4%. The March quarter was a challenging period for equity markets, with investor sentiment undermined by escalating geopolitical tensions in the Middle East. Market leadership was narrow, driven by strong outperformance from the Materials and Energy sectors, which account for approximately 30% of the benchmark, while Industrials companies (representing all other sectors of the economy) lagged. The rotation into diversified miners and bulk commodity producers reflects the perceived role of these sectors as effective inflation hedges and realization of higher commodity prices.
The Materials sector outperformed Industrials by nearly 10% over the quarter and energy stocks were supported by rising oil prices. This pronounced sector rotation, which has also been evident since 2025, detracted from relative Fund performance given our structural bias towards future focused sectors like healthcare and IT and underweight position in Materials. This positioning remains consistent with our Ethical framework, which limits exposure to the carbon‑intensive mining and energy companies that dominate the Materials sector. The Fund’s overweight position in small cap names also detracted as small capitalisation stocks weakened, as investors favoured larger, more liquid names. While this dynamic represented a short-term headwind to our investment style, we view it as cyclical rather than reflective of underlying company fundamentals and continue to see attractive value opportunities within high-quality businesses.
Defensive exposures provided resilience in the portfolio, particularly within the supermarket sector. Strong operational execution, improving customer metrics and earnings upgrades helped deliver downside protection in a volatile market environment. Our overweight positions in Coles and Woolworths contributed positively to returns over the period.
Another key theme during the quarter was a sharp sell‑off in technology stocks, particularly software names. Sentiment deteriorated as concerns emerged around the potential for artificial intelligence to erode the durability of certain business models, leading to broad valuation compression across the sector. The sectoral laggards included Siteminder, a travel technology company we own. PEXA was our strongest‑performing technology holding, which we view as a high‑quality, domestic digital infrastructure asset enabling secure property settlement, with additional upside optionality from its UK investment.
As we navigate this uncertainty, what is clear to us is that equity valuations in selective pockets of the market are now very attractive. At the end of March, the portfolio held minimal cash, reflecting the active deployment of capital at attractive valuations. Our investment process remains focused on disciplined stock selection, focusing on businesses trading at attractive valuations, supported by strong balance sheets and durable long‑term earnings profiles. We believe this positioning provides a solid foundation as volatility subsides, sector leadership broadens and returns increasingly reflect underlying company fundamentals rather than macro‑driven rotations.
Australian Shares (Wholesale) Fund Performance
As at 31 March 2026*
| fund | benchmark^ | |
|---|---|---|
| 3 months | -9.5% | -4.4% |
| 6 months | -13.4% | -4.6% |
| 1 year p.a. | -3.0% | 12.3% |
| 3 years p.a. | 6.3% | 9.5% |
| 5 years p.a. | 3.0% | 8.5% |
| 10 years p.a. | 8.3% | 8.5% |
| since inception p.a. | 10.9% | 9.6% |
^Benchmark is 65% ASX 100 / 35% ASX Small Ordinaries. Past performance is not a reliable indicator of future performance.
Inception date: 23/01/2012.
Australian Shares (Retail) Fund Performance
As at 31 March 2026*
| fund | benchmark^ | |
|---|---|---|
| 3 months | -9.7% | -4.4% |
| 6 months | -13.7% | -4.6% |
| 1 year p.a. | -3.6% | 12.3% |
| 3 years p.a. | 5.7% | 9.5% |
| 5 years p.a. | 2.4% | 8.5% |
| 10 years p.a. | 7.4% | 8.5% |
| since inception p.a. | 9.1% | 7.4% |
^Benchmark is 65% ASX 100 / 35% ASX Small Ordinaries. Past performance is not a reliable indicator of future performance.
Inception date: 19/09/1994.
Contributors and detractors
Top 3 contributors to Fund return
+25.5%
Woolworths Group Ltd (WOW)
+21.3%
PLS Group Limited (PLS)
+13.3%
PEXA Group Limited (PXA)
Top 3 detractors from Fund return
-53.0%
SiteMinder Limited (SDR)
-45.4%
WEB Travel Group limited (WEB)
-34.3%
Cochlear Limited (COH)Contributors
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Woolworth (WOW) shares rose 25.5% over the March quarter following a reassuring profit update that highlighted disciplined execution across the Group. Sales momentum improved in the core Australian Food division, reflecting strong delivery on value and availability, with an encouraging start to sales in the third quarter. This strength supported an upgrade to guidance to the ‘upper end’ of the mid‑to‑high single‑digit growth range, easing prior concerns that guidance may need to be revised lower. Woolworths’ defensive earnings profile also proved attractive amid the backdrop of geopolitical uncertainty.
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PLS Group (PLS) outperformed over the March quarter, reflecting improving spodumene prices and positive sentiment following the announced restart of its Ngungaju lithium spodumene plant. This reinforced confidence in PLS’s operational flexibility and ability to respond to improving market conditions, while its low‑cost position and strong balance sheet continue to differentiate the stock relative to peers.
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PEXA (PXA) delivered a solid share price performance over the March quarter with its 1H26 earnings and cash flow above expectations. The UK rollout is on track with its first tier one bank customer NatWest now live on the platform for remortgage transactions, albeit with ongoing investment as PEXA invests to scale the platform and build lender and conveyancer adoption. Whilst there is increased regulatory uncertainty from the IPART pricing review for the Australian business, we continue to see long‑term value in PEXA’s infrastructure‑like domestic cash flows and the optionality embedded in the UK expansion.
Detractors
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SiteMinder (SDR) underperformed during the quarter as market sentiment shifted negative from the software AI disruption and Middle East conflict risks. Operationally, underlying annual recurring revenue (ARR) growth and customer metrics remained sound, supported by continued penetration of larger hotel groups and steady uptake of the Smart Platform product suite. Management remains focused on balancing growth with improving operating leverage, and we continue to view SDR as well positioned to expand its share of a large global hotel technology market. The key medium‑term focus remains sustained ARR growth alongside improved free cash flow as the company tightens its cost growth.
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WEB Travel Group (WEB) underperformed during the quarter as sentiment toward travel stocks weakened, with heightened geopolitical uncertainty raising concerns around near-term travel demand. The expectation of subdued travel led to consensus earnings downgrades and alongside a company specific tax matter flagged in Spain, contributed to a derating of the shares. We continue to see fundamental value in WEB, which is trading on a single digit P/E multiple alongside expectations of double-digit earnings growth. WEB plays a critical role in the global travel ecosystem, contracting hotel inventory at scale, aggregating and merchandising this content on its technology platform, and distributing it globally.
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Cochlear (COH) underperformed over the March quarter as near‑term earnings momentum softened, exposing valuation risk in a stock priced for sustained high growth. The key driver in the sentiment shift was a weaker‑than‑expected 1HFY26 result, with currency headwinds, margin compression and earnings weighted to the second half. We remain positive on the medium‑term outlook, supported by the continued uptake of the new sound processor (now ~80% of US unit sales), the approaching obsolescence of the N7 processor, and progress toward the Totally Implantable Cochlear Implant, with the pivotal study underway and expected to complete in FY28.
Defensive exposures provided resilience in the portfolio, particularly within the supermarket sector. Our overweight positions in Coles and Woolworths contributed positively to returns over the period
Portfolio changes
Additions to the Fund
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Breville Group Limited (BRG) – Market weakness provided an opportunity to initiate a position in Breville. The company is a high‑quality operator in the premium home appliance segment, where demand remains resilient and cost pressures are effectively managed through pricing, mix optimisation and supply chain initiatives.
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PYC Therapeutics Limited (PYC) – We initiated a position in PYC through its recent capital raising. The company is developing novel treatments for Retinitis Pigmentosa and Polycystic Kidney Disease, two chronic conditions with limited effective treatment options. With funding secured through upcoming efficacy readouts, we see PYC as an attractive long‑term investment opportunity
Divestments from the Fund
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Shriro Holdings Ltd. (SHM) – The Fund exited a small position in Shriro, which is a household appliances and consumer electronics marketing distribution company. Due to the strong cashflow generation and robust balance sheet, the company was able to conduct two off-market equal access buybacks, which the Fund participated in. The remaining small position was exited on market.
- Sims Ltd. (SGM)
Market weakness provided an opportunity to initiate a position in Breville. The company is a high‑quality operator in the premium home appliance segment, where demand remains resilient and cost pressures are effectively managed through pricing, mix optimisation and supply chain initiatives.
What is clear to us is that equity valuations in selective pockets of the market are now very attractive. At the end of March, the portfolio held minimal cash, reflecting the active deployment of capital at attractive valuations.
Sector allocation
Sector overweights
Cash, Consumer Staples, Financials, Health Care, Information Technology, Utilities (renewables)
Sector underweights
Communication Services, Consumer Discretionary, Energy, Industrials, Materials, Real Estate
Interests in Australian Ethical Managed Funds are issued by Australian Ethical Investment Ltd (ABN 47 003 188 930, AFSL 229949) the Responsible Entity of the Australian Ethical Managed Funds.
The information is of a general nature and is not intended to provide you with financial advice or take into account your personal objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances and read the Financial Services Guide, relevant product disclosure statement (PDS) and Target Market Determination (TMD) available on our website. You may wish to seek financial advice from an authorised tax or financial adviser before making an investment decision. Past performance is not a reliable indicator of future performance.
Investing ethically and sustainably means that the investment universe will generally be more limited than non-ethical, non-sustainable portfolios in similar asset classes. This means that the portfolio(s) may not have exposure to specific assets which over or underperform over the investment cycle, and so the returns and volatility of the portfolio(s) may be higher or lower than non-ethical, non-sustainable portfolios over all investment time frames.
*Total returns are calculated using the sell (exit) price, net of management fees and gross of tax as if distributions of income have been reinvested at the actual distribution reinvestment price. The actual returns received by an investor will depend on the timing, buy and exit prices of individual transactions. Return of capital and the performance of your investment in the fund are not guaranteed. Past performance is not a reliable indicator of future performance. Figures showing a period of less than one year have not been adjusted to show an annual total return. Figures for periods of greater than one year are on a per annum compound basis. The current benchmark may not have been the benchmark over all periods shown in the above chart and tables. The calculation of the benchmark performance links the performance of previous benchmarks and the current benchmark over the relevant time periods.
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The information contained in this document is believed to be accurate at the time of compilation.