Multi-Asset Funds

Performance across all Multi-Asset Funds (‘Funds’) was positive for the calendar year, though the Funds underperformed their respective benchmarks. Growth assets like Listed Equities led total returns, but relative underperformance was driven primarily by a natural underweighting in Domestic Equities to the Materials sector in line with our Ethical Charter.

In local currency terms, Global Equity markets delivered their third straight year of double-digit growth (MSCI ACWI +19.7%). This was despite “Liberation Day” in April seeing markets initially plunge around 10% at the beginning of the second quarter, only for it to be undone by the end of the same quarter. While Communication Services was still the top performing sector during calendar year 2025, it was less than the previous year, with returns across all sectors more evenly distributed. Artificial Intelligence (AI) continued to remain a defining theme over the year, but not without bouts of volatility, stemming from a range of areas including potential competition from China’s DeepSeek, concerns over debt financing of capital expenditure, and individual companies missing revenue expectations.

At a country level, Liberation Day took the shine out of the US exceptionalism thematic of 2024, with Europe outperforming the US in 2025, for only the second time over the last 10 years (S&P 500: 17.4%, Euro STOXX 50: 21.2%). In fact, many European Banks outperformed the AI-related companies in the US thanks to better-than-expected economic conditions in Europe, supported by a favourable interest rate environment and attractive valuations. 

Emerging Market equities also outperformed Developed Markets, with Asian Equities a standout (MSCI EM: 31.3%, MSCI World: 18.4%, MSCI AC Asia: 29.6%). This meant the Funds’ tilts since the beginning of 2025 toward Asian Equities (and later broader Emerging Markets) added to relative outperformance. A slight overweight, to European equities, coupled with higher selection quality compared to benchmark also added value. However, this was not enough to offset the Funds’ stock selection in the US.

The Domestic Equity market saw strong returns for the Mining sector, while Technology and Healthcare lagged. This strength was largely driven by gains in Materials, and particularly gold-related stocks, as gold prices hit record highs. This had a negative impact on the Domestic Equities component of the portfolio with the Funds’ ethical process leading to a natural underweight to the Materials sector. So while stock selection in the Consumer Discretionary and Staples sectors assisted performance, partly due to our zero exposure to Aristocrat Leisure and Treasury Wine Estates for ethical reasons, this was not enough to offset the Funds’ Materials underweight.

In Fixed Income markets, most central banks continued their cutting cycle (except for Japan), as post-COVID inflation receded. Australia saw three cuts earlier in the year, while the US ended up cutting toward the end of the year, as the Federal Market Open Committee took a more cautious approach due to the uncertainty of the US administration’s tariff policies early in the year.

As end of year inflation data in Australia came out hotter than expected, hopes of a further cut evaporated, with markets now pricing in more chance of hikes in 2026.  Similar to Listed Equities, it was also ‘risk on’ in Credit markets, with spreads compressing to a new 10-year low near toward the end of the year. This was to the benefit of the Fund, given its relative overweight to Credit vs benchmark, in addition to our active approach to Rates positioning at various points of the yield curve, particularly in US and Europe during 2025.

Outlook

Two forces will test and define 2026: whether AI-driven productivity can tame inflation, and whether markets can sustain resilience despite rising geopolitical risks. Inflation has surprised on the upside, and the only credible path to a sustained decline in inflation without a growth slowdown is for AI to deliver measurable gains in output per worker and cost efficiencies. That outcome is also the linchpin for the lofty valuations that have driven the recent surge in AI‑thematic stocks. If those productivity gains arrive, earnings can justify current prices; if they do not, the market will separate winners with clear monetisation from hype‑driven names and valuations will reprice quickly.

Risk is everywhere, not just in a few sectors or regions, and even traditional safe havens may not hold as policy shifts. In this environment, valuation discipline becomes key to avoid mispricing and navigate uncertainty. 

We expect equities, and technology companies in particular, to remain important contributors to returns if they can demonstrate durable revenue and margin improvements. But relying solely on that narrow area of growth is risky. To balance upside with protection, we are increasing exposure to real assets and infrastructure that support the energy transition and deliver contracted or regulated cashflows. These assets offer inflation linkage, diversification and the aim to allocate capital towards projects that seek to support decarbonisation initiatives and deliver measurable social benefits subject to defined methodologies and ongoing assessment¹.

We are also hunting for value in areas that have lagged the market’s narrow leadership. Small caps, healthcare and building materials contain companies with attractive fundamentals and lower valuation multiples; they offer rerating potential if growth normalises and cyclical demand recovers. Commodities will remain an important portfolio diversifier: precious metals have been strong contributors, but many transition metals – primarily lithium – trade below prior peaks and present compelling entry points given the secular rise in energy storage and electrification demand. For defensive assets, we prefer our domestic bond market which offers higher term-premiums and does not appear to face the potential tail-risks as the US and parts of Europe.

Multi-Asset Funds (Wholesale): Performance vs benchmark^*

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*All returns are net of fees for the Wholesale option. Find more information on these funds via the managed funds page including Retail performance. Past performance is not a reliable indicator of future performance.

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^ Benchmark: SAA Weighted Index.  

- Balanced Fund SAA Weighted Benchmark changed from Morningstar Multi-sector Balanced to SAA Weighted Benchmark from 1 Sep 2012. The historical benchmark returns are calculated by linking indices.

- High Growth SAA Weighted Benchmark changed from 75% S&P/ASX 200/25% MSCI World ex Australia to SAA Weighted Benchmark from 1 October 2021. Previously, benchmark changed from S&P ASX 200 to 75% S&P/ASX 200 Industrials/25% MSCI Global Climate from 29 August 2013, then to 75% S&P/ASX 200 Industrials/25% MSCI World ex Australia from 1 July 2016, then to 75% S&P/ASX 200/25% MSCI World ex Australia from 13 August 2019. The historical benchmark returns are calculated by linking indices.

Contributors

• International Equities - On a weighted-basis companies, US mega caps like NVIDIA (+29.0%) and Alphabet continued to provide the bulk of returns due to their size. Though the Funds’ overweight to European banks, like Societe Generale (+173.2%) and ING Group (+77.4%), provided additional value thanks to their strong outperformance over the year.  In addition, our diversification into Asian Equities like, AIA Group (+35.1%) and CATL (+53%) also added relative value.  However, this was not enough to offset the Funds’ stock selection in the US, which saw the asset class underperform its benchmark due to underweighting various companies including Tesla (recently excluded), Alphabet and Palantir Technologies, and overweight underperforming positions like Fiserv.
  
  
• Growth Alternatives - The Funds saw exposures in select private equity, venture capital and infrastructure investments appreciate, as well as value realised through asset sales.  During the year, the Funds’ finalised the sale of Australiasian life insurer, Resolution Life, as well as agreed to the sale of American data center company, Aligned Data Centers.
  
  
• Domestic Equities - The Funds benefitted from overweight positions in PLS (+92.7%), Domain (+79.3%) and Sims (+54.0%), while its exclusion of ANZ and Materials companies like BHP, and Rio Tinto, as well as gold miners, like Evolution Mining, detracted value, resulting in underperformance compared to benchmark.

All asset classes generated positive absolute return over the quarter.

The extent to which AI-driven productivity can tame inflation will be one of the big forced to define 2026.

Portfolio changes

Additions to the Funds

• Emerging Market Equities– Diversified the Funds’ International Equities exposure, through select companies throughout Taiwan, China, Korea, and Latin America.

• Global Listed Infrastructure – Increased exposure to Global Listed Infrastructure companies due to concerns that inflation may persist at elevated levels for an extended period

• Neoen (Unlisted Infrastructure) – Neoen is one of the world’s leading independent producers of exclusively renewable energy. They operate close to 200 assets across three continents. One of its flagships include Western Downs Green Power Hub in Australia, comprised of the largest solar farm in the country (460 MWp) and Western Downs Battery (212 MW / 424 MWh).

Reductions from the Funds

• EU Carbon Allowances – As carbon permits continued their rally throughout the year, the Funds took profit and halved their position.
   

• Resolution Life (Private Equity) – Resolution Life is a global life insurance group focusing on reinsurance and the acquisition and management of portfolios of life insurance policies.  On 30 October 2025, Nippon Life Insurance Company acquired the Resolution Life Group..
   

Equity market saw strong returns for the Mining sector, while Technology and Healthcare lagged. This strength was largely driven by gains in Materials, and particularly gold-related stocks, as gold prices hit record highs

Risk is everywhere, not just in a few sectors or regions, and even traditional safe havens may not hold as policy shifts. In this environment, valuation discipline becomes key to avoid mispricing and navigate uncertainty.