Australian Shares Fund
The Australian Shares Fund (Wholesale) (the ‘Fund’) dropped 4.1% net of fees in the quarter ended 31 March 2025, compared to its benchmark which fell 2.6%. The Australian Shares Fund (Retail) fell 4.2% net of fees. It was the worst quarterly performance for the Australian equity market in nearly 3 years.
Equity markets dropped to 7-month lows, as global uncertainty and a tepid domestic earnings season rattled investor confidence. Trump tariffs dominated the headlines and accentuated share market swings, creating opportunities for our active stock picking style of investing.
Our funds held elevated cash levels leading up to recent volatility which means we had been looking to deploy capital into quality investments at more attractive valuations. We see volatility and short-term corrections as an opportunity to buy companies at more reasonable valuations than may have previously been possible. The Fund built up positions in companies such as CSL and Siteminder during the quarter.
For the March quarter, the Materials sector was the largest detractor to our performance. This was due to the Fund not owning gold stocks, which represent 17% of the Small Ordinaries by benchmark weight. 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.
The Financials sector was the best performing sector in the March quarter, largely due to our overweight position in the private health insurers, Medibank and NIB Holdings. NIB performed notably well as they re-iterated earnings guidance and received approval for premium increases, which should help mitigate claims inflation. The Healthcare sector also contributed positively with Nanosonics the stand-out after receiving approval for a new device, Coris. This more than offset the disappointing outcome on Opthea following two negative outcomes on trial results.
Also worth noting that 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 followed up with a revised $4.43 price in March subject to due diligence. We divested from takeover target Bigtincan, which has entered into a scheme implementation deed with Vector Capital.
The Fund benefited from takeover interest, with deals consummated by Ansarada, Symbio and Capitol Health. We participated in one initial public offering, Cuscal, as we were attracted to the investment fundamentals and growth profile.
Outlook for the Fund
We are optimistic about the potential for growth in pockets of the Australian share market and believe this market can provide opportunities to buy shares with upside to our valuation expectations. Our pioneering and authentic ethical investment approach has navigated every market scenario.
We see volatility and short-term corrections as an opportunity to buy companies at more reasonable valuations than may have previously been possible. The volatility that we saw in the market in February was the highest on record and this dispersion is a fertile environment for stock pickers like us to invest.
Australian Shares (Wholesale) Fund Performance
As at 31 March 2025*
| fund | benchmark^ | |
|---|---|---|
| 3 months | -4.1% | -2.6% |
| 6 months | 4.0% | 1.6% |
| 1 year p.a. | 2.7% | 5.2% |
| 3 years p.a. | 13.8% | 13.1% |
| 5 years p.a. | 9.2% | 7.9% |
| 10 years p.a. | 12.1% | 9.4% |
| since inception p.a. | -4.7% | 9.8% |
^Benchmark is 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 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 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
+69.5%
Domain Holdings Australia Ltd. (DHG)
+27.5%
NIB Holdings Ltd (NHF)
+51.2%
Nanosonics Ltd (NAN)
Top 3 detractors from Fund return
-51.4%
Nuix Ltd. (NXL)
-100.0%
Opthea Limited (OPT)
-28.8%
Macquarie Technology Group Limited (MAQ)Contributors
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Domain (DHG) was a positive contributor in the March quarter as they received a non-binding bid of $4.43 per share (up from $4.20 initially) from CoStar which was at a premium of 42% to the pre-bid price. The Fund took the opportunity to sell down part of the fund’s holdings. We view the transaction as having a solid likelihood of going through, having been recommended by the board and having the support of Domain’s largest shareholder.
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NIB Holdings (NHF) was a strong performer in the March quarter after it was oversold in 2024 on concerns of faster than expected margin decline due to increased claims costs. At the 1H25 result in February, NHF experienced a moderation in claims inflation and guided to full year margins at the top end of its 6-7% target range. The government approved premium increases of 5.8% for NHF from 1 April 2025, which has alleviated concerns of claims inflation for the upcoming year.
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Nanosonics (NAN) was a key positive contributor during the quarter as it benefitted from both a guidance upgrade and US Federal Drug and Administration approval for its new high level disinfection endoscope product, Coris. This approval paves the way for commercial launch in 1Q26 with a phased roll-out expected for the product. Coris provides a long-term driver for growth for Nanosonics and an expanded total addressable market.
Detractors
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Nuix (NXL) shares retreated during the quarter as they softened growth expectations in annualised contract value (ACV) for FY25 to 11-16% (from 15%) which implies a 2H25 weighting due to the slippage of some larger enterprise deals. We note that there are some larger sized deals in the pipeline, of which the timing of their closure will be a key factor to where the ACV growth lands for FY25. We have taken the opportunity to gradually re-add to our holdings on valuation grounds as the company continues to scale its new product offering, after reducing the fund’s exposure prior to the 1H25 update.
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Opthea (OPT) shares were placed in suspension due to the release of OPT’s phase three clinical trial data that showed OPT’s Wet Age-related Macular Degeneration drugs failing to meet the primary end points in both clinical trials. We are very disappointed in this outcome for both our investors and patients. wAMD remains one of the leading causes of blindness and we were very hopeful on the treatment outcomes.
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Macquarie Technology (MAQ) shares declined during the quarter, despite a 1H earnings result that was in line with market expectations. 1H profit was a record, however free cash flow turned negative as MAQ commenced a big capex build for the new data centre facility at Macquarie Park. With a strong balance sheet behind them, MAQ is entering a new phase of development over the coming years that will transform the business into an increasingly data centre dominated company.
Domain was a positive contributor in the March quarter following a non-binding bid from CoStar, a premium of 42% to the pre-bid price.
Portfolio changes
Additions to the Fund
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Super Retail Group Limited (SUL) – Following recent share price weakness, the Fund added Super Retail, which operates Super Cheap, MacPac, Rebel and BCF stores. SUL has a strong balance sheet and we see the stock as undervalued at ~12x PE multiple.
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Amotiv Limited (AOV) is an automotive business comprised of a portfolio of high-quality brands with strong market positions in key categories. Over time, earnings are expected to reflect operating leverage from improved cyclical conditions and returns from growth investments.
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GPT Group (GPT) is a diversified real estate owner and manager of retail, industrial and office assets. GPT has a strategy to sell the $12 billion of assets on its balance sheet to grow its funds management business. If executed over the medium term, this should lead to higher earnings growth.
Reductions from the Fund
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Bigtincan Holdings Ltd. (BTH) – The Fund divested takeover target Bigtincan, which has entered into a scheme implementation deed with Vector Capital.
The Healthcare sector also contributed positively during the quarter with Nanosonics the stand-out after receiving approval for a new device, Coris.
The Financials sector was the Fund’s biggest contributor to performance in the March quarter, largely due to our overweight position in the private health insurers, Medibank and NIB Holdings.
Sector allocation
Sector overweights
Cash, Communication Services, Consumer Staples, Financials, Health Care, Industrials, Information Technology, Utilities (renewables)
Sector underweights
Consumer Discretionary, Energy, Materials, Real Estate
*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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