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Australian Shares Fund

Australian Shares Fund commentary for the quarter ended 30 September 2023.
Published 26 Oct 2023   |   12 min read

The Australian Shares Fund (Wholesale) (the ‘Fund’) declined by -0.6% net of fees in the quarter ended 30 September 2023, outperforming its benchmark which declined -0.8%. The Australian Shares Fund (Retail) declined 0.7% net of fees for the year, also outperforming the benchmark.

It was the second consecutive quarter of declines for the Australian sharemarket, as investors digested reporting season updates, which led to aggregate consensus earnings downgrades for FY24. Cost inflation was a common theme across corporate Australia, with bottom line earnings also impacted by growing interest costs.

Macro factors continued to be a driver of equity market volatility in the September quarter, as shifting sentiment around the outlook for rates continued. With inflation data remaining sticky, market expectations firmed that interest rates will need to stay higher for longer to combat it.

The Fund’s investments in the Technology sector added value during the September quarter due to stock selection, while Energy detracted from performance. Energy stocks rose amid higher oil prices due to global supply imbalances. The Fund has nil exposure to the Energy sector due to the application of our ethical criteria1.

The Fund’s large cap names outperformed over the quarter, benefiting from stock selection. The small and microcap exposure in the Fund had a neutral impact relative to the S&P ASX300 benchmark. Although we had favourable stock selection in small caps compared to the S&P ASX Small Industrials, there is continued disparity between returns of small cap versus large cap performance.

The Fund benefited from takeover interest, with Symbio receiving a proposed takeover offer from Superloop. Subsequent to the September balance date, a rival bidder Aussie Broadband emerged with a higher offer for Symbio. During the quarter, the Fund received proceeds from consummated takeovers of vitamin company Blackmores and wellbeing software company Limeade during the quarter.

Australian Shares (Wholesale) Fund Performance

As at 30 September 2023~

fund benchmark$
3 months -0.6% -0.8%
6 months 5.6% 0.1%
1 year p.a. 10.6% 12.9%
3 years p.a. 6.9% 10.8%
5 years p.a. 7.8% 5.2%
10 years p.a. 10.2% 7.5%
since inception p.a. 12.2% 9.2%

$ Benchmark: 65% ASX 100 / 35% ASX Small Ordinaries. Past performance is not a reliable indicator of future performance.

Inception date: 23/01/2012.

Australian Shares (Retail) Fund Performance

As at 30 September 2023~

fund benchmark$
3 months -0.7% -0.8%
6 months 5.3% 0.1%
1 year p.a. 9.9% 12.9%
3 years p.a. 6.2% 10.8%
5 years p.a. 7.0% 5.2%
10 years p.a. 9.0% 7.5%
since inception p.a. 9.5% 7.1%

$ 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)


Bravura Solutions (BVS)


Cyclopharm (CYC)

Top 3 detractors to Fund return


Healius (HLS)


Bigtincan (BTH)



  • Nuix (NXL) shares rose 68% in the September quarter after delivering a strong financial update. Led by a refreshed management team, Nuix demonstrated strong growth in recurring revenue, which is measured by annual contracted value (ACV). Nuix showed discipline on costs and positive underlying free cashflow, which was favourably received by the market. The momentum seems likely to continue, with management targeting further recurring revenue growth and operating leverage in FY24. Nuix also resolved a litigation appeal from a former employee in August, bringing a close to the Ed Sheehy legal proceedings.

  • Bravura (BVS) was a strong performer during the September quarter as the stock reacted favourably to progress on the re-set of the business under the stewardship of new CEO, Andrew Russell. Further developments will be seen in FY24, which is a phasing year for the business as the cost restructuring programme benefits start coming through. The business, which provides mission critical software used in financial services firms, is expected to pivot to cashflow break-even in the second half of FY24 and this was positively received by investors.

  • Cyclopharm (CYC) shares rose 42% ahead of the US Food and Drug Administration Prescription Drug User Fee Act (FDA PDUFA) approval date of 29 September. A favourable outcome was achieved and CYC’s Technegas device and drug is now approved for diagnosis of Pulmonary Embolism, and other disorders, within the United States. Shipments are expected to commence from Nov-23 and favourable reimbursement rates offer a total addressable market opportunity of US$180m of sales per annum.

  • Our shareholding in Healius (HLS) detracted from performance in the September quarter due to a weaker FY23 result and outlook. Unfortunately, FY24 likely remains a transition year as Healius’ turnaround continues. The overall quantum of debt and lack of full-year dividend also weighed on investor sentiment during the quarter. We continue to see a pathway forward for HLS as base-pathology earnings revert to pre-COVID-19 levels as GP volumes return.

  • Bigtincan (BTH) shares declined 28% in the September quarter as a raft of challenging news flow was released. From an operational perspective, recurring revenue growth slowed and churn increased in their customer base. The shares are trading at an historical low multiple of 1.1x enterprise value/ sales. The sales enablement company needs to demonstrate a clear path to be sustainably cashflow break-even to see improvements in its share price, in our view. Shareholders are also increasingly frustrated by the delays in the potential change of control process and the share price has now ascribed nil value to an outcome.

  • Our shareholding in PEXA (PXA) detracted from performance in the September quarter, as question marks were raised on their progress in the United Kingdom. The market has pushed out the timing of revenue generation and expectations for the UK until milestones are achieved with key lenders. The core Australian exchange, which facilitates the transfer or re-financing of properties, performed resiliently in their FY23 financial results, despite the softer residential property market backdrop. Property volumes appear to have bottomed in Australia, which bodes well for FY24. At these share price levels, we believe that nil value is being ascribed to the UK story, which provides growth optionality outside of the domestic exchange franchise.


Nuix (NXL) shares rose 68% in the September quarter after delivering a strong financial update.

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. The shares declined 10% in the September quarter, following a weaker FY23 result (due to theft) and delays to their customer fulfillment centre. This share price weakness provided an opportunity to add a new name to the Fund.

  • 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 11.2x forward PE or ~1x book value and offering double digit earnings growth in FY24, we thought it was opportunistic to add the stock to the portfolio.

  • Resmed (RMD AU) – Resmed is a leading global player in the sleep and respiratory care markets, providing Continuous Positive Airway Pressure (CPAP) machines for treating obstructive sleep apnea (OSA). Concerns around the margin outlook and fears that weight loss drugs could reduce demand for RMD’s products going forward weighed on the share price. While uncertainty will likely remain, we think a lot of this downside risk is factored into the share price given that RMD’s P/E multiple is at its lowest point since 2016.

Sell-downs from the Fund
  • 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.


Our shareholding in Healius (HLS) detracted from performance in the September quarter due to a weaker FY23 result and outlook.

Macro will continue to play a role in the broader volatility of markets, with persistent inflation and interest rates perched higher.
Sector allocation

Sector overweights
Cash, Communication Services, Financials, Health Care, Industrials, Information Technology, Utilities (renewables)

Sector underweights
Consumer Discretionary, Consumer Staples, Energy, Materials, Real Estate

Outlook for the Fund

The Australian Shares Fund is an all-cap fund with active stock selection across our Ethical universe. Our process focuses on fundamental research and we seek opportunities to invest in attractive companies, where the share price materially undervalues the long-term valuation.

The declines in the September quarter provided an opportunity for the Fund to add three new names (Resmed, Challenger and Coles), as we see fundamental upside in these names. We are defensively positioned in the consumer sector and will continue to opportunistically review companies to selectively add.

The disparity in returns between large and small capitalized companies has been pronounced in the past 2 years. However, we believe this has provided an environment where there are attractive relative opportunities in the small cap segment of the market. There has been takeover interest in some of our holdings, with two consummated in the September quarter.

Macro will continue to play a role in the broader volatility of markets, with persistent inflation and interest rates perched higher. In this environment, we are attracted to companies with pricing power and strong balance sheets, although our small and microcap exposures are typically in an earlier stage of commercialisation and investing in growth initiatives.

See Fund info

1. Further information on our ethical investment criteria is available in our Ethical Guide available at

~ 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.

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.