High Conviction Fund

The March quarter was a challenging environment for equity markets, with elevated volatility and more cautious investor sentiment as geopolitical risks in the Middle East intensified. Market returns were concentrated in a narrow set of sectors, with strong gains from Materials and Energy—together accounting for around 30% of the benchmark—while Industrials companies lagged more broadly.

Higher oil prices underpinned a strong performance from Energy stocks, and Materials outperformed Industrials by nearly 10% over the quarter. This sharp sector rotation, which has been a feature of markets since 2025, weighed on relative performance given the Fund’s structural preference for Industrials and lower exposure to Materials. While this positioning created a short-term performance headwind, we see the rotation as cyclical in nature and not reflective of the underlying strength of the businesses we own. Importantly, periods such as this continue to present opportunities to accumulate high quality Industrial companies at increasingly attractive valuations.

The Fund declined by 10.4% over the quarter, compared with the benchmark decline of 2.0%. The two key drivers of the difference in returns to the benchmark were the outperformance of the Energy and Materials sectors noted above, and sustained weakness across the Technology sector driven by AI disruption concerns. The Fund has limited exposure to the Materials and Energy sectors, consistent with the Fund’s ethical investment framework, which restricts investment in the carbon intensive mining and energy companies that dominate those sectors.

The Technology sector experienced heightened volatility during the quarter, with a notable selloff across software names. Several portfolio holdings, including Xero, SiteMinder and CAR Group, were impacted as sentiment weakened amid short term concerns about the potential implications of artificial intelligence for certain business models. While these concerns drove broad based valuation compression across the sector, the recent pullback has, in our view, created compelling long-term opportunities in high quality businesses that we expect to be more resilient to AI disruption than current market pricing implies. In many cases, we see AI as reinforcing—and potentially expanding—the opportunity set for these companies, given their strong business models built on trusted customer relationships, proprietary datasets and specialised workflows that are difficult to replicate.

At the end of March, the portfolio held minimal cash, reflecting our confidence in the opportunity set and our active deployment of capital where valuations have become more compelling. Our investment approach remains disciplined and fundamentally driven, focused on identifying businesses trading at attractive valuations, supported by strong balance sheets and the ability to deliver durable earnings growth over the long term. 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.

High Conviction (Wholesale) Fund Performance (with performance fee)

As at 31 March 2026^*

^Benchmark is the S&P/ASX 300 Accumulation Index. Past performance is not a reliable indicator of future performance.

Inception date: 01/10/2021.

Contributors

• PLS Group (PLS) outperformed over the March quarter, reflecting improving spodumene prices and positive sentiment following the announced restart of the Ngungaju plant. This reinforced confidence in PLS’s operational flexibility and ability to respond to improving lithium market conditions, while its low cost position and strong balance sheet continue to differentiate the stock relative to peers. 

• QBE Insurance (QBE) shares outperformed in the March quarter following the release of a strong FY25 result, which highlighted the strength of its underwriting and portfolio diversification. The insurance company delivered a 19.5% ROE in a weakening commercial insurance market and established guidance for >15% ROE over the medium term. Sustained earnings momentum over recent years compares favourably with domestic insurers, who have experienced earnings volatility from recent weather events.

• PEXA Group (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

• SiteMinder (SDR) underperformed during the quarter as market sentiment shifted negative from the software AI disruption and Middle East conflict risks. Operationally, underlying 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.

• 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 via APIs and B2B booking portals.

• Xero (XRO) underperformed during the quarter as the company was caught up in the global sell-off from the software AI disruption risk thematic. We view Xero as relatively insulated from disruption, stemming from its embedded data and infrastructure including bank feed integrations, payment rails, security, brand and distribution capability. In addition, the partnership with Anthropic to integrate Claude into Xero should also strengthen its competitive moat. We continue to view Xero as a high‑quality long‑term compounder with a large addressable market and strong structural tailwinds from cloud adoption among small and medium‑sized businesses.

Cleanaway, Australia’s largest waste management company, was added to the portfolio at an attractive valuation point. Earnings growth outlook over the next three years could be driven by execution of operational efficiency programs, strategic infrastructure investments and earnings contributions from recent acquisitions.

Portfolio changes

Additions to the Fund

• Cleanaway Waste Management Ltd. (CWY) – Cleanaway, Australia’s largest waste management company, was added to the portfolio at an attractive valuation point. We expect a valuation uplift to be driven by the strong earnings growth outlook over the next three years driven by execution of operational efficiency programs, strategic infrastructure investments and earnings contributions from recent acquisitions..
   

Divestments from the Fund

• Sims Ltd. (SGM) – Market sentiment has turned increasingly bullish on Sims Lifecycle Services, which provides data chip recycling and repurposing solutions to hyperscale datacentre customers. Recent share price strength has pushed the stock beyond our internal valuation, leading us to take profits and exit the position, with capital redeployed into opportunities offering superior valuation upside.

Higher oil prices underpinned a strong performance from Energy stocks, and Materials outperformed Industrials by nearly 10% over the quarter. We see this sharp sector rotation, as cyclical in nature and not reflective of the underlying strength of the businesses we own.

Sector allocation

Sector overweights
Communication Services, Consumer Staples, Health Care, Industrials, Information Technology, Real Estate, Utilities (renewables)

Sector underweights
Consumer Discretionary, Energy, Financials, Materials

At the end of March, the portfolio held minimal cash, reflecting our confidence in the opportunity set and our active deployment of capital where valuations have become more compelling