International Shares Fund
Global equity markets had a year characterised by high volatility, but ultimately the MSCI World Ex Australia Index posted another year of strong double-digit returns, closing up 18.58%. Markets initially surged following President Trump’s election victory in November on optimistic expectations of deregulation, business growth stimulation, and tax cuts. However, these gains were reversed in April as President Trump’s aggressive “Liberation Day” tariff policies caused a steep correction in global markets. A sharp rebound was then triggered by news of a 90-day pause in tariff increases and substantially lowered reciprocal tariffs for all non-retaliating countries. In the final month of the year, markets were impacted by geopolitical volatility in the Middle East and energy price spikes. However, this was short-lived too, with a ceasefire negotiated after 12 days. Ultimately, the global economy remained resilient with equities closing the year at all-time highs.
From a style perspective, global markets were once again driven by momentum factors, including price momentum and earnings revisions. When momentum factors do well, it means that outperforming stocks continue to outperform. In the first half of the financial year, strength in momentum was driven by the AI mega trend and high interest rates which resulted in narrow market leadership and extreme crowding. This in turn drove the outperformance of Size and Growth factors. The DeepSeek shock was a challenge to US AI leadership, and triggered an extreme momentum unwind in February and March. However, as the Trump administration paused tariff hikes, momentum rebounded as markets sustained their V-shaped recovery.
The International Shares Fund (Wholesale) (the “Fund”) returned 18.05% over the year net of fees. The International Shares Fund (Retail) returned 17.59% net of fees over the year. At a sector level, our overweight exposure to Financials and Communication Services contributed positively to performance. Within Communication Services, Netflix’s share price rose over 100% due to stronger than expected subscriber growth. Our underweight exposure to the Consumer Discretionary and Consumer Staples sectors also assisted performance as they were impacted by tariff gyrations. Conversely, stock selection in Industrials and Information Technology detracted from performance. The performance of the “Magnificent 7” was mixed with Amazon (not held), Alphabet, Apple, and Microsoft posting below-benchmark returns, while Tesla (recently divested), Meta, NVIDIA and outperformed. The AI theme and associated capital spending boom remained robust with NVIDIA reporting solid results despite trade restrictions.
Outlook for the Fund
Global equities have shown resilience despite extreme policy uncertainty. Looking ahead, we expect ongoing tariff concerns to continue to induce market volatility, and events in the Middle East will remain a focus. The Trump administration has pivoted to tax cuts after the House narrowly passed the “Big, Beautiful Bill” in early July. Equity market valuations remain elevated, but could be supported by central bank rate cuts, successful tariff negotiations and reductions, and strong Tech fundamentals, particularly if the AI theme remains intact.
International Shares (Wholesale) Fund Performance
As at 30 June 2025*
| fund | benchmark^ | |
|---|---|---|
| 3 months | 5.6% | 5.9% |
| 6 Months | 2.9% | 3.4% |
| 1 year | 18.1% | 18.6% |
| 3 years p.a. | 18.7% | 20.4% |
| 5 years p.a. | 14.6% | 15.8% |
| since inception p.a. | 11.5% | 12.5% |
^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 30 June 2025*
| fund | benchmark^ | |
|---|---|---|
| 3 months | 5.4% | 5.9% |
| 6 months | 2.7% | 3.4% |
| 1 year | 17.6% | 18.6% |
| 3 years p.a. | 18.2% | 20.4% |
| 5 years p.a. | 14.0% | 15.8% |
| since inception p.a. | 5.8% | 9.0% |
^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
+30.4%
NVIDIA Corporation (NVDA-US)
+76.3%
Broadcom Inc. (AVGO-US)
+49.5%
Meta Platforms Inc Class A (META-US)
Top 3 detractors from Fund return
-50.5%
Novo Nordisk A/S Class B (NOVO.B-DK)
-13.0%
UnitedHealth Group Incorporated (UNH-US)
-33.3%
Merck & Co., Inc. (MRK-US)Contributors
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NVIDIA Corporation (NVDA) shares delivered a total return of 30.4% over the 12 months, driven by continued dominance in AI infrastructure and record-breaking financial performance. The company reported strong growth in data centre revenue, fuelled by global demand for its advanced GPUs and strategic partnerships across the Middle East and Asia. Its chips now power most of the world’s leading supercomputers, reinforcing its position at the heart of the AI revolution.
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Broadcom Inc. (AVGO) shares delivered a total return of 76.3% over the 12 months, driven by strong demand for its AI-enabling chips and strategic expansion into infrastructure software. The company benefited from robust growth in its data centre and networking segments, as enterprises accelerated investment in AI and cloud technologies. Its acquisition of VMware continued to deliver synergies, enhancing its software portfolio and recurring revenue base. Broadcom’s consistent execution, diversified business model, and leadership in high-performance semiconductors helped sustain investor confidence and fuel its impressive share price performance.
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Meta Platforms Inc. (META) shares delivered a total return of 49.5% over the 12 months, driven by strong growth in advertising revenue and continued momentum in its AI and metaverse initiatives. The company expanded its AI capabilities across its platforms, enhancing user engagement and monetisation. Its Reality Labs division showed signs of operational improvement, while core apps like Facebook and Instagram maintained solid performance. Strategic investments in infrastructure and content moderation also supported long-term growth prospects.
Detractors
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Novo Nordisk A/S Class B (NOVO.B) shares posted a total loss of 50.5% over the 12 months, reflecting a sharp reversal in sentiment following earlier strength in its obesity and diabetes franchises. Despite continued global demand for GLP-1 therapies like Wegovy, the company faced pricing pressures, regulatory scrutiny, and operational challenges in key markets. Strategic collaborations and pipeline developments offered long-term promise, but near-term execution risks weighed on investor confidence.
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UnitedHealth Group Incorporated (UNH) shares posted a total loss of 36.7% over the 12 months, reflecting a difficult year marked by rising medical costs and elevated utilization rates across its insurance business. The company faced margin pressure as more patients sought care, particularly in outpatient and behavioural health services, which increased claims and weighed on profitability. While its Optum division continued to grow through expanded care delivery and technology services, these gains were not enough to offset the broader cost challenges.
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Merck & Co., Inc. (MRK) shares posted a total loss of 33.3% over the 12 months, reflecting a challenging period marked by slowing growth in key therapeutic areas and increased competitive pressure. While the company continued to invest in its oncology and vaccine pipelines, revenue momentum was impacted by patent expirations and softer-than-expected demand for certain flagship products. Operational headwinds and pricing dynamics in international markets also weighed on performance.
NVIDIA Corporation shares delivered a total return of 30.4% over the 12 months, driven by continued dominance in AI infrastructure and record-breaking financial performance.
Portfolio changes
Additions to the Fund
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Aviva Plc (AV-GB) is an international insurance company that provides a wide range of general and life insurance products, including fire, motor, marine, aviation, and transport insurance, along with various financial services. The holding was initiated as part of the optimization process which aims to reduce tracking error.
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Schroders PLC (SDR-GB) is a global financial services company specializing in active asset management, advisory, and wealth management services. The holding was initiated as part of the optimization process which aims to reduce tracking error.
- Telefonaktiebolaget LM Ericsson Class B (ERIC.B-SE) provides mobile connectivity solutions, including hardware, software, and services, to telecom operators, enterprises, and the public sector. The holding was initiated as part of the optimization process which aims to reduce tracking error.
Reductions from the Fund
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Tesla, Inc. (TSLA-US) designs, manufactures, and sells electric vehicles, battery energy storage systems, solar products, and related services, positioning itself as a leader in automotive and clean energy. It was divested during the year following an updated Ethical assessment.
- Patterson Companies Incorporated (PDCO-US) distributes dental and animal health products, including consumables, equipment, and value-added services, to dental and veterinary professionals. The holding was reduced as part of the optimization process which aims to reduce tracking error.
Equity market valuations remain elevated, but could be supported by central bank rate cuts, successful tariff negotiations and reductions, and strong Tech fundamentals, particularly if the AI theme remains intact.
From a style perspective, global markets were once again driven by momentum factors, including price momentum and earnings revisions. When momentum factors do well, it means that outperforming stocks continue to outperform.
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)
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.
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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