High Conviction Fund

The High Conviction Fund delivered a +5.7% return (net of fees) for the September quarter, outperforming its benchmark, the ASX 300 Index, which recorded a return of +5.0%. Stock selection was a key contributor to the outperformance during the quarter.

With equity market valuations remaining elevated, particularly in some of the largest cap names, the September quarter saw small cap indices outperform their larger cap peers as investors began to refocus on areas of the market where valuations remain more attractive. The High Conviction Fund has been well positioned for this, with the Fund’s investments in attractive small to mid-cap technology companies like Pexa (+15%), Siteminder (+63%), and Nuix (+34%) delivering strong performance during the quarter, while their larger cap tech peers underperformed. Similarly, the Fund’s decision not to own CBA (-8%) on valuation grounds paid off as the stock underperformed following a strong year in FY25. In telecommunications, Aussie Broadband (+49%) outperformed its larger peers after announcing a big contract win.

Within Consumer Staples, the recent addition of Graincorp (+19%) to the portfolio during the quarter paid dividends as conditions appear favourable for upcoming harvests, while owning Coles (+13%) and not Woolworths (-13%) contributed positively as Coles continues to execute strongly.

The broader market saw interest return to resource and mining companies, with the Materials sector (+21%) significantly outperforming the rest during the quarter. The big miners benefited, while a strong rally in the gold price drove gold miners higher. This was a material headwind for the portfolio given our natural underweight position to these companies, so it was pleasing to outperform the broader market despite this market dynamic. Excluding the impact of the resource sector, the Fund outperformed the ASX 300 Industrials index by +4.4%.

The Fund’s overweight position in the Healthcare sector (-10%) was a detractor during the quarter, with the sector the worst performing in the market. We attribute some of this to the uncertainty caused by possible tariffs and other costs imposed in the US market, however CSL (-16%) was a surprising disappointment during earnings result season that negatively impacted the Fund. Nevertheless, we believe earnings growth will accelerate and with the stock now trading at a discount to the market, CSL is fundamentally too cheap in our view and we have continued to build our position.

Outlook for the Fund

With equity market valuations elevated, stock selection remains key and our active investment approach continues to look for companies that are fundamentally mispriced with opportunities to grow over the longer term. The Fund maintains overweights to Healthcare, Technology, and Renewables which we believe will be positive long-term growth sectors, while the underweight position to Financials reflects our view that the sector remains expensive.

High Conviction (Wholesale) Fund Performance (with performance fee)

As at 30 September 2025^*

^Benchmark is the S&P/ASX 300 Accumulation Index.

*Past performance is not a reliable indicator of future performance.

Inception date: 01/10/2021.

Contributors

• Siteminder (SDR) had a strong FY25 result with higher than expected underlying ARR growth of 27% which was high quality based on the solid 6.2x LTV/CAC ratio with minimal churn. The FY26 outlook implies a continuation of this strong growth trend, driven by the ongoing rollout of the new Smart Platform products which have been gaining traction since their launch. We remain positive on the long-term investment thesis of expanding its share and take rate of the large addressable market.
  
  
• Pilbara Minerals (PLS) returned 88% over the quarter as spodumene prices performed strongly over the period, primarily driven by the suspension of a major Lithium project in China raised prospects of temporarily tighter supply outlook. While near term price movements are difficult to predict, PLS is strongly positioned with a Tier 1 asset, strong balance sheet with approximately $1B cash balance, and a relatively favourable position on the cost curve. In addition, we remain positive on the longer-term demand/supply fundamentals of the nascent lithium industry, and our investment in PLS is well placed to benefit and realise further upside from current levels.
  
  
• Aussie Broadband (ABB) had a strong quarter driven by a solid FY25 earnings result in August that came in at the top end of the guidance range, an earnings guidance upgrade for FY26, and more importantly the announcement of a new 6-year wholesale customer agreement with More and Tangerine. With a strong balance sheet enabling the pursuit of M&A and/or organic investment, ABB appears well positioned for strong earnings growth over the next few years.

Detractors

• CSL (CSL) underperformed during the quarter, driven by a slightly softer FY26 outlook and ongoing uncertainty surrounding US pharmaceutical industry tariffs. Despite this, the long-term investment thesis remains intact, supported by sustained global demand for plasma-derived therapies. The stock continues to trade at an attractive ~15% discount to the all industrials (excluding banks and REITs), while targeting ~10% EPS growth p.a. over the mid-term.
  
  
• WEB Travel (WEB) - shares fell after releasing a soft financial update at their annual general meeting (AGM), citing geopolitical issues which has impacted pockets of travel demand. While recent fluctuations in travel demand reflect short-term cyclical pressures, we expect these trends to normalise. Over the medium term, WEB has an attractive double digit earnings profile underpinned by market share gains, structural tailwinds and operating leverage. With WEB trading at a discount to the market multiple, we see material upside from the current share price.
  
  
• QBE Insurance (QBE) – despite a strong 1H25 result, QBE’s share price was impacted by investor concerns about a slowing premium rate environment and decline in underwriting margins. Management acknowledged the slowing environment but emphasised that targeted growth in high margin segments and portfolio diversification would help manage the cycle. QBE trades a price to earnings ratio of ~11.5x FY25f earnings and an 18% discount to its 10 year average, and below domestic peers like IAG and Suncorp.

A strong rally in the gold price drove gold miners higher, a headwind for the portfolio given our natural underweight position to these companies. It was pleasing to outperform the broader market despite this market dynamic.  

Portfolio changes

Additions to the Fund

• Graincorp Limited (GNC) is vertically integrated bulk grain handling company with high quality infrastructure assets and a strong market position, servicing the domestic and international markets. It also has nutrition and energy business producing a range of oils, meals and food products. We added GNC to the portfolio as we believe the market is underestimating the earnings outlook for the stock in FY26 driven by favourable crop conditions on the East Coast of Australia. We see compelling valuation upside, while a strong balance sheet also provides management with flexibility to pursue growth opportunities, while also returning capital to shareholders.

Divestments from the Fund

• Spark New Zealand (SPK-NZ) is a leading telecommunications provider in New Zealand. The HCF acquired a small position in the previous quarter but was unable to acquire a meaningful position at the desired valuation levels. While we continue to monitor the stock for an attractive entry point, the position was divested at a small profit and the capital reallocated into more attractive opportunities.

The Fund’s decision not to own CBA (-8%) on valuation grounds paid off as the stock underperformed following a strong year in FY25.  

Sector allocation

Sector overweights
Communication Services, Consumer Staples, Health Care, Information Technology, Utilities (renewables)

Sector underweights
Consumer Discretionary, Energy, Financials, Materials

With equity market valuations remaining elevated, particularly in some of the largest cap names, the September quarter saw small cap indices outperform their larger cap peers as investors began to refocus on areas of the market where valuations remain more attractive.