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Australian Shares Fund

Australian Shares Fund commentary for the calendar year ended 31 December 2023.
Published 22 Jan 2024   |   12 min read

The Australian Shares Fund (Wholesale) (the ‘Fund’) rose by 11.0% net of fees in the year ending 31 December 2023, compared to the benchmark which rose 12.2%. The Australian Shares Fund (Retail) rose 10.3% net of fees for the year underperforming its benchmark index.

Equity markets staged a strong end of year rally with the ASX300 benchmark index ending near record levels. Investor sentiment improved with interest rate expectations plateauing, as the synchronized move by central banks to tame inflation appears to be working.

The Fund’s investments in the Technology sector added value during the period due to stock selection with strong share price performance from holdings like Gentrack and Nuix. The Consumer Staples sector was also a contributor, benefiting from the takeover of Blackmores.

The Materials and Healthcare sectors detracted from performance during the year. The Fund has limited exposure to the performance in the Materials sector due to our Ethical screen process. The Healthcare sector lagged the equity market recovery and detracted from performance.

The Fund benefited from takeover activity. The Fund received proceeds from consummated takeovers of vitamin company Blackmores and well-being software company Limeade. Symbio and Damstra (which we have now divested) attracted bidding interest during the year. We expect the Symbio deal to consummate in 2024.

Australian Shares (Wholesale) Fund Performance

As at 31 December 2023~

fund benchmark^
3 months 3.8 8.4
1 year p.a. 11.0 12.2
3 years p.a. 1.9 9.0
5 years p.a. 10.4 10.1
10 years p.a. 10.5 8.2
since inception p.a. 12.2 9.8

^ Benchmark: 65% ASX 100 / 35% ASX Small Ordinaries. From 30 Sep 2023, benchmark changed from A&P/ASX 300 Accum Index. Previously, from 13 Aug 2019 benchmark changed from S&P/ASX Small Industrials Index to S&P/ASX 300 Accum Index. The historical benchmark returns are calculated by linking these indices. Past performance is not a reliable indicator of future performance.

Inception date: 23/01/2012.

Australian Shares (Retail) Fund Performance

As at 31 December 2023~

fund benchmark^
3 months 3.7 8.4
6 months 5.3 0.1
1 year p.a. 10.3 12.2
3 years p.a. 1.3 9.0
5 years p.a. 9.6 10.1
10 years p.a. 9.3 8.2
since inception p.a. 9.5 7.3

^ Benchmark: 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


Nuix (NXL AU)


Gentrack (GTK NZ)


Helia (HLI AU)

Top 3 detractors to Fund return


Healius (HLS AU)


Bigtincan (BTH AU)


OFX Group (OFX AU)

  • Nuix (NXL AU) share price strengthened after a positive update was provided at their annual general meeting. The technology company stated that it had a positive start to FY24 and re-iterated targets to grow annual contract value by around 10% in FY24. Management is expecting to be underlying cashflow positive for the full year, although may fluctuate through the year. Under this management team, the business has seen significant transformation for the business, particularly in evolving the product offering and engaging with their customers, which has yielded positive results.

  • Gentrack (GTK NZ) was the fund’s top performing stock, following a strong earnings result and investor day update. The FY23 result showed strong revenue growth of 34% driving GTK’s biggest profit in 5 years, with significant free cash flow generation leaving GTK’s balance sheet in a very strong position going into FY24. The Investor Day highlighted the global growth potential of GTK’s modern utilities billing software offering as large incumbent providers struggle to keep pace with changing customer requirements.

  • Helia (HLI AU) has experienced a favourable claims environment due to a strong employment market and resilient house prices, with actual conditions better than expected. This has resulted in a period of share buybacks, with a current share buyback of $100 million and the company declaring sustainable annual dividends of 28 cents per share enhancing HLI’s appeal as an income stock. HLI recently gained S&P/ASX 200 index inclusion. Benefits of lower claims experience may continue if macroeconomic conditions hold. This is offset by lower housing credit growth and new business written which should be cyclical in nature.

  • Healius (HLS AU) shares fell throughout the period as diminishing Covid-19 testing revenues combined with solvency concerns around its balance sheet. Towards period end, these factors resulted in a capital raise required by lenders to pay down debt. The raise was accompanied by full-year guidance that implied a material 1H vs 2H skew at the midpoint and was priced at a 30% discount, further impacting the share price.

  • Bigtincan (BTH AU) shares fell after they disclosed that the change of control proposal, which had put the ownership of the company in limbo for nearly a year, had concluded with no binding proposal. The guidance on FY24 revenue was modestly below expectations, but the company is focusing on managing a cost base re-set, with the objective to target free cashflow in FY24. This pivot on the cost base will put the company in a more sustainable position to balance growth and free cashflow.

  • OFX Group (OFX AU): despite an upgrade to FY24 earnings guidance at the FY23 result, the share price declined during the year as uncertainty around the economic environment caused some softness in parts of the business, particularly consumer. The 1H24 result initially caused some concern with an escrow release relating to the Firma acquisition impacting the reported numbers. However, this impact will largely have washed through by the end of FY24 and we see the business well placed to continue growing in FY25. Valuation is extremely attractive with the stock trading on <11x PE.


The global growth potential of the Gentrack’s modern utilities billing software offering stands out as large incumbent providers struggle to keep pace with changing customer requirements.

Portfolio changes

Additions to the Fund
  • Coles (COL AU) – Coles is a leading supermarket and liquor chain in Australia, with an extensive national store footprint. We saw an opportunity to add the name following the FY23 profit release which fell short of analyst expectations and the delayed commissioning of the Ocado customer fulfilment centre.

  • Challenger (CGF AU) Challenger is a leading provider of annuity products in Australia and manages a multi-boutique asset strategy in the Fidante division. With the stock trading at an attractive valuation and offering double digit earnings growth in FY24, we thought it was opportunistic to add the stock to the portfolio.

  • Resmed (RMD AU) RMD is a leading global MedTech player in the sleep and respiratory care markets, providing Continuous Positive Airway Pressure (CPAP) machines for treating obstructive sleep apnea (OSA). RMD is the market leader in a large addressable market, with devices growing high single digit growth annually. We saw the weakness in share price from concerns around weight loss drugs provided an opportunity to add the name.

  • IPH (IPH AU) – IPH is an international intellectual property services group and is the largest filer of patents and trademarks in Australia and Canada. We believe that IPH is trading on an undemanding valuation and an attractive dividend yield.
  • Webject (WEB AU)Webjet is a digital technology travel business, with a strong balance sheet and trading at an attractive valuation considering the growth profile in the hotel marketplace division.

Reductions from the Fund
  • Healius (HLS AU) – While we fundamentally like the pathology sector, we view Healius as the expensive opportunity with higher risk given its FY24 guidance skew. It currently trades at a ~19% FY25 PE premium to SHL and ~81% to ACL on the same approach. We divested our shareholding during the period.

  • Blackmores (BKL AU) – BKL was acquired by Japanese conglomerate Kirin for $95/share, with shareholders voting to approve the takeover and receiving the final proceeds on August 10th.
  • Limeade (LME) – Shares in LME were acquired by WebMD Health, a PE backed health services company that has a strategy to deliver health and well-being content and services through digital enabled tools. The proceeds were received on August 14th.


While we fundamentally like the pathology sector, we divested Healius because of its expensive valuation and perceived higher risk compared to its peer group.

The Fund’s investments in the Technology sector added value during the period due to stock selection with strong share price performance from holdings like Gentrack and Nuix.
Sector allocation

Sector overweights
Healthcare, Communication Services, Financials, Cash

Sector underweights

Energy, Materials, Consumer Discretionary, Real Estate

Outlook for the Fund

The interest rate environment is now more supportive for equities with 10-year government bond interest rates down from their recent peaks and the market now expecting the RBA to cut base interest rates in 2024 on the back of lower inflationary expectations. Investor interest has been primarily focused on the large cap names to date, however we anticipate investors will increasingly invest down the market capitalization spectrum as they get comfortable with the interest rate outlook. We believe investor sentiment will improve in 2024. We continue to anticipate strong takeover activity with the corporate and private equity acquisition activity witnessed in 2023 continuing into 2024.

We have reasonable cash balances which we are looking to deploy into the large cap and the small cap part of the market in 2024.

See Fund info

This is general information only and is not intended to provide you with financial advice or take into account your individual investment objectives, financial situation or needs. You should obtain and consider the relevant Financial Services Guide, Product Disclosure Statement and Target Market Determination relating to this product before making a decision

*Total returns are calculated using the sell (exit) price, net of management fees, transaction costs and performance fees where applicable and are calculated based on distributions being reinvested. The actual returns received by an investor will depend on the timing of the buy and exit prices of individual transactions. Distributions 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.

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 Fund may not have exposure to specific assets which over or underperform over the investment cycle, and so the returns and volatility of the Fund may be higher or lower than non-ethical, non-sustainable portfolios over all investment time frames.

This commentary may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, Australian Ethical accepts no responsibility for the accuracy or completeness of, nor does it endorse any such third party material. To the maximum extent permitted by law, we intend by this notice to exclude liability for this third party material.

Australian Ethical acknowledges the Traditional Owners of the country on which we work, the Gadigal people of the Eora Nation, and recognise and celebrate their continuing connection to land, waters and culture. We pay our respects to Elders past and present and thank them for protecting Country since time immemorial.

See our Reconciliation Action Plan