International Shares Fund
Global equity markets delivered another strong year in 2025, with the MSCI World ex Australia Index rising by 12.53% and finishing near record highs. The International Shares Fund delivered a solid result, closely tracking its benchmark while maintaining strict adherence to Australian Ethical’s investment charter. The International Shares Fund (Wholesale) (the “Fund”) returned 11.43% over 2025. The International Shares Fund (Retail) returned 10.99% net of fees over the year.
The year was marked by sharp swings: early optimism following President Trump’s policy agenda gave way to a steep correction in February and March as aggressive tariff announcements triggered risk-off sentiment and an unwind in momentum trades. Confidence returned mid-year after a pause in tariff escalation and reciprocal reductions, driving a V-shaped recovery and broad-based gains into year-end. Geopolitical tensions – from Russia-Ukraine to Middle East flare-ups – added episodic volatility, but ceasefire agreements and stabilising trade talks helped restore sentiment. In December, the US Federal Reserve delivered a 25bps cut and signalled a cautious approach to further easing in 2026, supporting equities while keeping rate expectations fluid.
From a global style perspective, Momentum and Growth remained dominant drivers of equity gains, though late-year factor rotations favoured cyclicals and select Value cohorts. Large caps continued to outperform despite expectations for a small-cap resurgence. The Technology sector again led the market, with AI (Artificial Intelligence) remaining a defining theme. Early-year exuberance around AI gave way to a sharp correction as competitive pressures from China’s DeepSeek challenged US leadership, before rebounding later in the year as capital spending on AI infrastructure accelerated. Valuations stayed elevated versus historical norms, particularly in US Tech, reinforcing the need for discipline and diversification.
From a regional perspective, European equities enjoyed a particularly strong year with markets, including Austria, Spain, Italy and Finland, closing up more than 40% (in AUD terms). At the country level, stock selection in France and the Netherlands positively contributed to performance with Financials such as Societe Generale SA and ING NV posting strong returns as Europe’s continuing recovery led investors to seek cyclical value stocks. Conversely, stock selection in the US detracted from performance, partly due to our position in Fiserv Inc, which announced an earnings downgrade under new management.
From a sector perspective, our underweight exposure to Consumer Discretionary and Staples assisted performance. In particular Amazon Inc, which is not held by the Fund for ethical reasons, underperformed the broader market as investors favoured higher-growth AI names. The Fund’s overweight exposure to Financials also assisted performance. Meanwhile, stock selection in Industrials and IT negatively contributed to performance.
Global equities enter 2026 with a constructive backdrop as earnings growth, falling policy rates and an AI‑driven capex cycle support risk assets. The AI theme is broadening beyond mega‑cap technology into financials, utilities and logistics, with corporates investing for productivity and “FOBO” (fear of becoming obsolete). We expect that 2026 market leadership will be shaped by factor rotations and an increasing focus on how companies are adopting, monetising or benefiting from AI. That said, valuations are elevated versus history, particularly in the US and the Tech sector, which requires earnings expansion to be sustained. Geopolitical and policy risks—from tariff regimes to shifting fiscal and security priorities—remain non‑trivial and could inject episodic volatility. In our view, an effective stance for 2026 is to lean into earnings‑backed AI beneficiaries, balance exposure across regions/styles, and position with robust diversification for geopolitical shocks.
International Shares (Wholesale) Fund Performance
As at 31 December 2025*
| fund | benchmark^ | |
|---|---|---|
| 3 months | 3.1% | 2.6% |
| 6 Months | 8.3% | 8.8% |
| 1 year | 11.4% | 12.5% |
| 3 years p.a. | 21.5% | 22.1% |
| 5 years p.a. | 14.4% | 15.6% |
| since inception p.a. | 11.7% | 12.8% |
^Benchmark is the MSCI World ex Australia Index.
*Past performance is not a reliable indicator of future returns.
Inception date: 30/06/2015.
International Shares (Retail) Fund Performance
As at 31 December 2025*
| fund | benchmark^ | |
|---|---|---|
| 3 months | 3.0% | 2.6% |
| 6 months | 8.1% | 8.8% |
| 1 year | 11.0% | 12.5% |
| 3 years p.a. | 21.0% | 22.1% |
| 5 years p.a. | 13.8% | 15.6% |
| since inception p.a. | 6.1% | 9.2% |
^Benchmark is MSCI World ex Australia Index.
*Past performance is not a reliable indicator of future returns.
Inception date: 13/06/2007.
Contributors and detractors
Contributors and detractors
Top 3 contributors to Fund return
+53.9%
Alphabet Inc. Class A (GOOGL-US)
+29.0%
NVIDIA Corporation (NVDA-US)
+39.5%
Broadcom Inc. (AVGO-US)
Top 3 detractors from Fund return
-69.6%
Fiserv, Inc. (FI-US)
-38.4%
UnitedHealth Group Incorporated (UNH-US)
-44.1%
Novo Nordisk (NOVO.B)Contributors
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Alphabet Inc. (GOOGL) returned 53.9% in 2025 driven by the global integration of Gemini 3 into Google Search, proving that AI enhances rather than disrupts its core advertising business. Simultaneously, Google Cloud became a major profit engine as demand for its proprietary TPU chips and AI infrastructure surged. Investor confidence was further bolstered by a landmark legal victory easing breakup fears. These factors, alongside disciplined cost management, led to a significant stock re-rating and new historic highs.
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Nvidia Corporation (NVDA) returned 29% in 2025 as the company capitalised on the massive global transition to accelerated computing. The primary driver was the highly successful launch and rapid scaling of its Blackwell architecture, which saw overwhelming demand from major cloud providers and large enterprises. This led to record-breaking revenue growth across its data center division, while a shift toward selling complete integrated systems and high-margin software resulted in significant margin expansion. Despite increased competition, NVIDIA maintained its dominant market share and generated substantial free cash flow.
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Broadcom Inc. (AVGO) returned 39.5% in 2025. This performance was fueled by a massive surge in demand for its high-speed networking solutions and specialised processors, which became essential for scaling large-scale AI data centers. Additionally, the company realised significant synergies from the integration of VMware, which shifted toward a high-margin recurring revenue model and significantly boosted overall profitability. By securing long-term contracts with the world’s largest cloud providers and consistently expanding its software-driven margins, Broadcom successfully convinced investors of its long-term earnings power, leading to a major re-rating of its stock price.
Detractors
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Fiserv, Inc (FISV) experienced a challenging year in 2025, with shares declining as the company navigated a transition in its growth strategy. A third-quarter earnings miss and revised guidance reflected near-term headwinds, including slower organic revenue growth and margin pressure as management prioritised longer-term technology investments over short-term pricing gains. While these adjustments weighed on performance, they position Fiserv to strengthen its competitive edge and modernise its platform for sustainable growth.
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UnitedHealth Group (UNH) also faced headwinds in 2025, with elevated medical utilisation impacting profitability and prompting a reassessment of near-term earnings guidance. While this drove a valuation reset, UnitedHealth remains a market leader with a diversified business model.
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Novo Nordisk (NOVO.B) shares declined in 2025 as the market shifted from early “weight-loss euphoria” to more sustainable expectations. While sales growth for obesity treatments normalised and guidance was trimmed, the company maintained solid revenue growth and expanded its global rollout. Competitive pressures and a pipeline setback also weighed on sentiment.
Our underweight exposure to Consumer Discretionary and Staples assisted performance. In particular Amazon Inc, which is not held by the Fund for ethical reasons, underperformed the broader market
Portfolio changes
Additions to the Fund
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American Water Works Company, Inc (AWK-US) is the largest publicly traded water and wastewater utility in the US, providing regulated drinking water and wastewater services to residential, commercial, industrial, and government customers across multiple states.
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Capgemini SE (CAP-FR) is a global French IT services, consulting, and digital transformation company that helps organisations improve and modernise their business through technology.
- SiriusXM Holdings Inc. (SIRI-US) provides subscription-based satellite radio, offering music, sports, talk, and news across vehicles, mobile devices, and home platforms. The company also owns Pandora, a music and podcast streaming service, generating revenue from subscriptions and advertising.
Reductions from the Fund
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Contemporary Amperex Technology Co., Limited (3750) is world’s largest manufacturer of lithium-ion batteries, especially for electric vehicles (EVs) and energy storage systems.
American Water Works, the largest publicly traded water and wastewater utility in the US, was added to our ethical investment universe and added to the portfolio. The company provides regulated drinking water and wastewater services to residential, commercial, industrial, and government customers across multiple states.
Sector allocation
Sector overweights
Cash, Communication Services, Financials, Industrials, Information Technology, Real Estate
Sector underweights
Consumer Discretionary, Consumer Staples, Energy, Health Care, Materials, Utilities (renewables)
The AI theme is broadening beyond mega‑cap technology into financials, utilities and logistics, with corporates investing for productivity and “FOBO” (fear of becoming obsolete).
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.