Skip to main content

End of Financial Year (EOFY) cut-off dates and information about making contributions to your superannuation can be found here.

Australian Shares SMA Portfolio

Australian Shares SMA Portfolio commentary for the quarter ended 31 March 2024.
Published 17 Apr 2024   |   10 min read

Outlook for the fund

The SMA portfolio is a concentrated portfolio of mostly larger cap stocks, selected via our fundamental research process from within our Ethical investment universe, as defined by our Ethical Charter. The portfolio continues to have significant exposure to key areas of growth across Information Technology, Healthcare, and Renewables. These sectors account for almost 40% weighting in the portfolio, compared to ~15% in the ASX 200 index, which we believe will deliver strong returns for investors over the long-term.

With equity markets marching to all-time highs, we are finding it more challenging to find attractively priced stocks with fundamental valuation upside. The S&P ASX300 index is now trading one standard deviation above its historical mean, which indicates that valuations are reasonably full across the market. However, with elevated volatility in the market, we also see opportunities for individual stock pickers in segments of the market that are out of favour. During the March quarter we added two new names to the portfolio – Webjet and IPH – where we see fundamental valuation appeal over the long-term. As an active investor, we will continue to look for similar opportunities to deliver returns for us and our investors.

Commentary for the quarter ended March 2024

The portfolio recorded a gross return of +8.9% for the quarter ended 31 March 2024, outperforming the benchmark ASX 200 Accumulation Index’s return of +5.3%.

Equity markets hit record levels as investors digested reporting season updates, which were not as bad as feared. Investor sentiment improved with interest rate expectations plateauing following a synchronized move by Central Banks to tame inflation, prompting a shift from a defensive stance in portfolios to add growth.

Positive stock selection and an underweight position to the carbon-intensive Materials sector were the two main themes driving portfolio outperformance versus the benchmark in the March quarter.

Positive contribution from the Healthcare sector was a result of stock selection, with key holdings in Cochlear and Resmed performing well following positive earnings results. Negative sentiment began to ease around the potential impact of obesity drugs on Resmed’s business. The portfolio also benefited from its underweight position in CSL as the stock underperformed the market. Stock selection also benefited the Industrials sector, with Reliance Worldwide re-rating higher following a positive earnings result, compounded by the company trading on low valuation multiples prior to the result.

The portfolio benefited during the quarter from its underweight position in the carbon intensive Materials sector. Concerns around the outlook for the Chinese economy weighed on commodity prices and negatively impacted the share prices of the major iron ore producers, which are not held in the portfolio on the basis of our ethical screening process.

Mild detractors from performance in the March quarter were the Communication Services and Real Estate sectors. Communication Services was weighed down by underperformance in Domain Group. Despite recording reasonable earnings growth in its 1H result, investors were disappointed that it underperformed close peer REA Group. Underperformance in the Real Estate sector was largely driven by not owning Goodman Group, which has been the beneficiary of positive investor sentiment following its decision to invest in data centres.

Australian Shares SMA Portfolio Performance

Gross returns as at 31 March 2024*

Portfolio* benchmark^
3 months 8.9 5.3
1 year p.a. 15.3 14.5
3 years p.a. 5.6 9.6
since inception p.a. 13.6 14.0

Source: Praemium portal.

^Benchmark: S&P/ASX 200 Accumulation Index. Past performance is not a reliable indicator of future performance.

Inception date: 16/04/2020.

Contributors and detractors

Top 3 contributors to Fund return


Reliance Worldwide Corp. Ltd (RWC)


Suncorp Group Limited (SUN)


PEXA Group Limited (PXA)

Top 3 detractors to Fund return


Fletcher Building Limited (FBU)


Australian Clinical Labs Ltd (ACL)


Domain Holdings Australia Ltd (DHG)


  • Reliance Worldwide (RWC) shares rose 30% over the March quarter following a strong interim result despite subdued operating conditions, which highlighted the earnings resilience of the business. In particular, the America’s division achieved better than expected results driven by new product launches and operating efficiency improvements. During the quarter RWC also announced the acquisition of Holman Industries which is a strong strategic fit for the business and supports future earnings growth.

  • Suncorp (SUN) delivered a strong 1H24 result, with Cash EPS up 13%. This was driven by strong investment income. Insurance margins are expected to remain within target as the increase in reinsurance costs moderates and pricing increases earn through. The ACCC approved the sale of the bank to ANZ and pending two further approvals, the transaction is expected to complete by the middle of this year.  Suncorp as a pure-play general insurer is expected to trade at a similar PE multiple to IAG and this has been reflected in the recent share price increase.

  • PEXA (PXA) shares rose 22% in the March quarter as the property technology company delivered a solid financial result for its Australian business and progressed its strategy in the UK. Two top tier UK banks have now verbally committed to go live with PEXA in the UK by mid-year, which was an important catalyst for investor sentiment. We believe the core Australian business is an attractive business model with a strong industry position and believe the UK offers material growth optionality outside of the domestic franchise.


  • Fletcher Building (FBU) detracted from performance during the March quarter following a disappointing interim earnings update, legacy issues, and balance sheet concerns. In addition, management changes were announced. We continue to see long term value in FBU, which has a strong market position in the NZ Building products industry, as earnings recover, and legacy issues are largely resolved by the end of the calendar year.

  • Australian Clinical Labs (ACL) detracted from performance in the March quarter due to a weaker 1H24 result and guidance. Unfortunately, FY24 remains a transition year as general practitioner (GP) volumes continue to lag historic levels. While we acknowledge ACL’s strong fundamentals with a robust balance sheet and low relative PE multiple, we divested the stock during the quarter as it failed to maintain appropriate liquidity metrics to remain in the portfolio.

  • Domain (DHG) detracted from performance during the quarter despite a reasonably good 1H result that delivered 49% NPAT growth. Despite this, investors were disappointed with the relative underperformance compared to its peer, REA Group, which delivered better revenue growth in the half. With property markets strengthening, particularly in the key markets of Sydney and Melbourne, we expect DHG to deliver robust earnings growth over the next 12 months and, with valuation looking attractive compared to REA, we remain bullish on the stock.

Government tradesmen working on pipes for energy and water supply

Reliance Worldwide, the waterflow and control manufacturer, achieved better than expected results in its American division, driven by new product launches and operating improvements.


Portfolio changes

Additions to the Portfolio

  • IPH Ltd. (IPH) – IPH is an international intellectual property services group and is the largest filer of patents and trademarks in Australia and Canada. We believe that IPH is trading on an undemanding valuation and an attractive dividend yield.

  • Webject Limited (WEB) – Webjet is a digital technology travel business, with a strong balance sheet and trading at an attractive valuation considering the growth profile in the B2B hotel marketplace division.

Divestments from the Portfolio

  • Australian Clinical Labs (ACL) – ACL is the third largest pathology services provider in Australia. Along with other pathology providers, ACL has been challenged in recent times by lower volumes driven by a reduction in GP referrals. While we think this situation will improve over time, trading liquidity in the stock has fallen below our threshold to remain in the portfolio and we have therefore divested the position.

Coastal property from above in Australia

We remain positive on Domain as property markets strengthen, even though its share price underperformed peer REA Group in the last quarter.

Positive stock selection and an underweight position to the carbon-intensive Materials sector were the two main themes driving portfolio outperformance versus the benchmark in the March quarter.

Sector allocation

Sector overweights
Utilities (Renewables), Industrials, Health Care

Sector underweights
Materials, Energy, Consumer Discretionary

See SMA info

*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.

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.

See our Reconciliation Action Plan