Portfolio highlights

The Portfolio generated a negative return for February despite Australian, European and US share markets briefly reaching historic highs during the month. The  optimism on President Trump’s agenda for lower taxes and less regulation reversed sharply with the announcements of increasing tariffs on China from 10% to 20%, implementing a 25% tariff on Canada and Mexico, and introducing a 25% tariff on all steel and aluminum imports.

The Direct Australian shares strategy outperformed the ASX 300 benchmark in February and over 1 year. Medibank Private released a stronger-than-expected 1H 2025 result. This was driven by strong execution, with good customer retention, as well as a favourable claims environment.

The Arrowstreet Global Equity Fund (AUD Hedged) produced 1.12% excess performance for the month, with the quantitative process pivoting and finding positive returns against a negative benchmark.

Flat to falling global and Australian bond yields proved supportive for the portfolio’s diversified fixed income sleeve. Positive absolute performance from all managers was well received and was supported by the portfolio’s tactical exposure to investment grade credit and yield enhancement. 

US shares slipped back from historic highs in the last week of February with President Trump intensifying tariffs and escalating the trade wars. President Trump signalled an intention to implement a 25% tariff on automobile, semiconductor and pharmaceutical imports which would also dramatically impact global trade relationships. US economic data was also softer, with weak results for January’s retail sales and consumer sentiment. European shares provided a positive surprise with strong gains in February. Expectations for the European Central Bank to continue cutting interest rates proved very supportive. Chinese shares made very strong gains, with improved credit growth and the national government’s announcement of more capital for banks. This comes despite concerns over China’s weak property sector and the new US President’s tariff agenda.

Australian shares fell sharply after briefly making historic highs in February with the Reserve Bank of Australia lowering interest rates. Leading the slide was the information technology sector (-12.6%). There were also pronounced falls in healthcare, real estate, energy and financial sector shares with investors becoming more cautious. Australia’s economic data continues to be mixed. There was positive news with strong jobs growth and the monthly inflation indicator showing steady annual inflation at 2.5% in January. However, both consumer spending and sentiment remain subdued.

Global government bond yields were buffeted by President Trump’s tariff agenda and varying assessments of inflation risks. The downside risks to global growth prospects from higher tariffs dominated bond markets with notable exceptions being China & Japan which actually saw rising bond yields. Credit markets spreads remain narrow as the attraction of high absolute yields is still mitigating concerns over global political risks.