Portfolio highlights

The Portfolio generated a positive return for the September quarter, with global shares (hedged) delivering a very strong 8% return. A solid rise in the Australian Dollar versus the US Dollar, Euro and Japanese Yen reduced the global shares (unhedged) to a strong 6.4% gain. Optimism on artificial intelligence prospects and lower US interest rates have been key drivers of rising share prices.

The Arrowstreet Global Equity Fund (Hedged) delivered strong absolute returns (7.8%) over the quarter. Apple and NVIDIA were the top contributors, with Apple rallying on strong iPhone 17 demand and NVIDIA surging on AI-related data centre revenue and demand for its Hopper and Blackwell GPUs. The portfolio’s hedged exposure supported returns, as the AUD strengthened against the USD.

The MLC Real Return Moderate fund returned 3.5% over the quarter. Activity over the quarter included rotating large-cap US equity exposure into small caps via Russell 2000 futures, promoting diversification of earnings, and reducing valuation risk. Elevated equity exposure has been rewarded with strong returns, with the portfolio continuing to roll over its derivative positions to hedge against potential downside risks.  

Wall Street’s benchmark S&P 500 Index ended the quarter near historic highs with a quarterly gain of 8%. Investors have taken the view that President Trump’s tariffs are just a temporary threat in terms of higher US inflation and penalising global exports to the US. Asian share markets have also delivered impressive performances. China delivered a very strong 19.7% return in local currency terms. The Chinese government efforts to providing more financial support to counteract tariffs and a weak residential property market has seen Chinese shares make a strong recovery. Taiwan (19.3%) and Korea (17.2%) have also posted exceptionally strong returns over the quarter. Japan’s share market delivered a 10.4% return with the central bank taking a more cautious stance on raising interest rates despite persistent inflation.

Australian shares delivered a solid 5% return for the quarter. The Resources sector was a key positive driver with a 19.8% quarterly return given more encouraging Chinese growth prospects. Performance was solid performance from the Industrial sector (4.3%) with business surveys indicating an improvement in trading conditions after the Reserve Bank’s interest rate cuts in May and August. Property securities also delivered a strong 4.8% quarterly return with the benefit of lower interest rate settings by the central bank. Australia’s economy is experiencing modest consumer spending but slower job creation. Lower mortgage interest rates and wages growth finally exceeding inflation suggests that consumer prospects may be brightening compared to the tough ‘cost of living’ crisis of recent years.

Global bonds (hedged) delivered a solid 1% quarterly return given optimism that the US central banks would continue to lower interest rates over coming months given slower jobs growth. Australian bonds only delivered a modest 0.4% quarterly return. Higher Australian inflation results for July and August have diminished hopes for the RBA lowering interest rates again this year.