Diversified Shares Fund
Global and Australian equity markets have experienced a turbulent start to the year, marked by heightened volatility following President Trump's election victory last November. Initially, markets surged on optimistic expectations of deregulation, business growth stimulation, and tax cuts. However, these gains were reversed in the new year as aggressive tariff policies sparked concerns over escalating inflation and decelerating business growth.
The S&P/ASX 300 Index and the MSCI World Ex Australia Index peaked in mid-February, only to decline amid rising tariff uncertainties. A brief recovery in mid-March saw Wall Street recoup some losses, but this was short-lived. Ultimately, the market remained under pressure due to uncertainties surrounding "Liberation Day" on April 2, with the Fund’s benchmark ending the March quarter down 2.73%. The Diversified Shares Fund (Wholesale) (the “Fund”) returned -3.10% over the quarter net of fees. The Diversified Shares Fund (Retail) returned -3.20% net of fees over the quarter.
From a global perspective, the year started with a general rotation out of US equities, given historically high valuations, into European and Asian Equities, which have outperformed on a relative basis. Many top-performing themes of the past two years have underperformed in 2025. AI-related themes, which dominated in 2023 and 2024, are experiencing a challenging start to the year. This has been driven by real competitors emerging, like DeepSeek, proving this is no longer a US-centric phenomenon. Additionally, there has been a lack of clarity in when and how the largest capex spenders will begin to see returns on their AI investments. Momentum and Size factors have underperformed, which reflects the severe level of over-crowding in these factors at the start of the year and the selloff in Megatech stocks. Instead, investors have been accelerating their positioning into Defensive / Low volatility factors.
In the domestic component of the portfolio, the underweight exposure to the Materials sector negatively impacted performance as non-holdings BHP, Rio Tinto and the gold miners outperformed. The gold price has soared as investors have moved into defensive physical assets amid a backdrop of geopolitical uncertainty. The technology sector also detracted from performance as the sector retreated reflecting the risk-off sentiment in the market. Our overweight exposure to the Communications Services sector positively contributed to performance as investors positioned more defensively and as Telstra’s share price was boosted by an increased interim dividend and the launch of a major share buyback program. Domain was a positive contributor in the quarter, following the announcement of a takeover bid. The initial takeover offer of $4.20 from US-listed Co-Star was lobbed in February and we took the opportunity to exit our position over the quarter. Our underweight exposure to the Consumer Discretionary sector also positively contributed to performance as consumer sentiment broadly deteriorated and investors sought to understand tariff impacts.
In the international component of the portfolio, our overweight exposure to the Information Technology sector detracted from performance, while our underweight exposure to Consumer Discretionary stocks positively contributed to performance. In the Information Technology sector, the tech giants experienced sharp share price corrections with NVIDIA’s share price falling nearly 20% and Microsoft down 11%. These falls reflected the emergence of competition from China-based DeepSeek and investors reassessing growth expectations amid economic uncertainties. The Consumer Discretionary sector faced challenges due to tariff uncertainties, as many companies in this space depend heavily on imported goods. Notably, Amazon (not held in the Fund) experienced a 14% decline in share price over the quarter.
It is now clear that the tariffs announced by President Trump at “Liberation Day” on April 2 were larger and deeper than the market was expecting. Market participants are finding President Trump very unpredictable, which is a major factor contributing to market volatility. Global markets have experienced a correction, which is not unexpected given the starting point of elevated valuations at the end of 2024. We have experienced falls of a similar magnitude at the beginning of the pandemic, the 2008 global financial crisis and the 1987 stock market crash. In each of these instances, markets recovered and grew to reach new highs. A sustainable recovery will depend on successful tariff negotiations and reductions, further declines in valuations to more attractive levels, central bank interest rate cuts and/or improvements in underlying fundamentals.
Diversified Shares (Wholesale) Fund Performance
As at 31 March 2025*
| fund | benchmark^ | |
|---|---|---|
| 3 months | -3.2% | -2.7% |
| 6 months | 4.0% | 5.2% |
| 1 year p.a. | 5.7% | 7.9% |
| 3 years p.a. | 12.0% | 14.0% |
| 5 years p.a. | 8.2% | 8.3% |
| since inception p.a. | -3.2% | -2.7% |
^75% S&P/ASX 300 Accumulation Index and 25% MSCI World ex Australia Index. Past performance is not a reliable indicator of future performance.
Inception date: 23/01/2012.
Diversified Shares (Retail) Fund Performance
As at 31 March 2025*
| fund | benchmark^ | |
|---|---|---|
| 3 months | -4.2% | -2.6% |
| 6 months | 3.4% | 1.6% |
| 1 year p.a. | 2.1% | 5.2% |
| 3 years p.a. | 13.0% | 13.1% |
| 5 years p.a. | 8.1% | 7.9% |
| 10 years p.a. | 9.5% | 7.3% |
| since inception p.a. | -4.2% | -2.6% |
^Benchmark is 75% S&P/ASX 300 Accumulation Index and 25% MSCI World ex Australia Index. Past performance is not a reliable indicator of future performance.
Inception date: 03/11/1997.
Contributors and detractors
Top 3 contributors to Fund return
+24.0%
Sims Ltd. (SGM)
+7.4%
Telstra Group Limited (TLS)
+13.8%
Arcadium Lithium Plc Chess Depositary Interests Repr 1 Sh (LTM)
Top 3 detractors from Fund return
-23.1%
Pilbara Minerals Limited (PLS)
-29.7%
Reece Limited (REH)
-25.9%
Spark New Zealand Limited (SPK)Contributors
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Sims Limited (SGM) shares rose 24% in the March quarter due to a combination of strong financial results, strategic business growth, and favourable market sentiment. The company delivered solid earnings with a notable improvement in trading margins despite flat sales volumes, while its Sims Lifecycle Services (SLS) segment posted strong revenue growth and improved margins. Additionally, the stock was buoyed by a broader industry tailwind after Toyota Tsusho’s premium bid for a rival recycling firm boosted investor confidence in the sector.
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Telstra Group Limited (TLS) share price increased 7.4% in the March quarter, supported by steady financial growth and shareholder-focused initiatives. The company reported higher revenue and profit in its half-year results, reflecting stable operational momentum. Investor sentiment was further boosted by an increased interim dividend and the launch of a major share buyback program. These actions, combined with ongoing confidence in Telstra’s strategic direction, helped lift the stock to its highest level in over a year by early April.
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Arcadium Lithium Plc (LTM) shares rose 13.8% in March quarter. While other lithium stocks struggled due to weakened pricing and market volatility, Arcadium's strong performance was largely driven by its acquisition agreement with Rio Tinto, which provided a premium valuation for the company.
Detractors
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Pilbara Minerals Limited (PLS) shares fell 23.1% in March quarter. This drop reflected the broader challenges within the lithium sector, particularly the ongoing weakness in lithium pricing. The market has been grappling with fluctuating demand and pricing pressures, as global economic uncertainty and trade tensions have impacted the outlook for lithium producers.
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Reece Limited (REH) experienced a decline of 29.7% in its stock performance during the March quarter, primarily due to challenges in the housing construction market in both Australia and the United States. The slowdown in this sector had a direct impact on Reece's sales, contributing to lower revenue and profits. The company’s financial results showed a decrease in both sales and net profit, which led to a reduction in its dividend payout. These headwinds reflected broader industry trends and market uncertainties, putting pressure on Reece’s stock during the quarter.
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Spark New Zealand Limited (SPK)'s share price experienced a decline of 25.9% in its stock performance during the March quarter due to several key challenges within the New Zealand telecommunications market. Intense competition, market saturation, and pricing pressures were significant factors impacting its performance. These challenges put strain on Spark's revenue growth and profitability, leading to weaker-than-expected results.
While other lithium stocks struggled during the quarter due to weakened pricing and market volatility, Arcadium Lithium shares rose strongly thanks to its acquisition agreement with Rio Tinto.
Portfolio changes
Additions to the Fund
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Republic Services, Inc. (RSG) – Republic Services is a leading provider of non-hazardous solid waste collection, recycling and disposal services, delivering sustainable environmental solutions to residential, commercial and industrial customers in the US. It was added to the portfolio after gaining Ethical approval during the year.
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Waste Management, Inc. (WM-) – Waste Management, Inc. provides comprehensive waste and environmental services, including collection, recycling, and disposal solutions, to residential, commercial, industrial, and municipal customers across North America. It was added to the portfolio after gaining Ethical approval during the year.
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Danaher Corporation (DHR) – Danaher Corporation designs, manufactures, and markets professional, medical, research, and industrial products and services, with a focus on life sciences, diagnostics, and biotechnology. It was added to the portfolio after gaining Ethical approval during the year.
Reductions from the Fund
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Arcadium Lithium Plc Chess Depositary Interests Repr 1 Sh (LTM) – Arcadium Lithium was acquired by Rio Tinto during the quarter at a healthy 90% premium.
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Domain Holdings Australia Ltd. (DHG) – Domain Holdings was exited following the announcement of a takeover bid. The initial takeover offer of $4.20 from US-listed Co-Star was lobbed in February and the position was sold at this time.
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Canadian National Railway Company (CNI) – Canadian National Railway is a leading North American transportation and logistics company, providing integrated rail and intermodal services that connect key markets across Canada and the US. The holding was reduced as part of the optimization process which aims to reduce tracking error.
AI-related themes, which dominated in 2023 and 2024, are experiencing a challenging start to the year. This has been driven by real competitors emerging, like DeepSeek, proving this is no longer a US-centric phenomenon.
Global markets have experienced a correction, which is not unexpected given the starting point of elevated valuations at the end of 2024. When we have experienced falls of a similar magnitude in the past, markets recovered and grown to reach new highs.
Sector allocation
Sector overweights
Cash, Communication Services, Financials, Industrials, Information Technology, Real Estate, Utilities (renewables)
Sector underweights
Consumer Discretionary, Consumer Staples, Energy, Health Care, Materials
*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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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.
The information contained in this document is believed to be accurate at the time of compilation.