Portfolio highlights

As at 30 September 2026: The portfolio returned -0.26% over the quarter as global and Australian share markets produced modest returns at a time when AI-driven investment continued to support markets. Inflation remained especially sticky following the reignition of the US / Iran conflict, which caused already high energy prices to skyrocket and forced central banks to continue raising rates.

The Antares Income Fund returned 1.2% over the September quarter, ahead of the Bloomberg AusBond Bank Bill Index's 1.1%. Bond markets endured a sharp repricing as oil-driven inflation lifted August CPI to 4.0% and the RBA raised the cash rate to 4.60%, while US 10-year Treasury yields touched a 19-year high of 5.3%. Near-neutral interest rate duration of 0.13 years insulated the portfolio, while a 5.6% portfolio yield, well above the benchmark's 4.4%, generated steady carry. Long breakeven inflation positions and US Treasury put options provided protection as inflation expectations and long-end yields climbed. Partly offsetting this, the curve steepening strategy detracted as tightening expectations flattened the yield curve. Additions to high-quality credit, including SSE and Coles, added yield without materially increasing credit risk.

Although the Resolution Capital Global Listed Infrastructure Fund delivered a negative return over the quarter of -6.5%, it outperformed its benchmark by 0.8%. The quarter interrupted an exceptional run, with the Fund returning around 21% in the nine months to June, almost double its benchmark, and 13.6% over the past year, 9.7% ahead. Momentum reversed from July. Escalation in the Middle East revived inflation fears and the Fed's first hike since 2023 pushed the US 10-year Treasury yield up 0.85% to 5.3%, hitting rate-sensitive utilities hardest. Utility holdings fell 6.9% against 10.0% for the sector, limiting the damage. NiSource fell 17.8% after Indiana regulators denied a gas cost-recovery tracker, while Entergy slid 13.4% on an earnings miss.

The ASX Top 20 Replication Portfolio returned 1.3% over the September quarter, tracking the S&P/ASX 20 as strength in healthcare and resources offset weakness in the major banks. CSL led the index, surging 39% in August as FY26 results beat revised guidance and a A$1.1 billion buyback was confirmed. BHP and Rio Tinto reinforced copper's growing earnings contribution, with BHP lifting EBITDA 27% and Rio raising its interim dividend 43% on a 75% jump in free cash flow. The big four banks detracted as successive rate rises, fragile consumer confidence and the removal of investor property tax concessions hit mortgage demand. Westpac reported a 20% fall in applications, and CBA fell around 12% after its result despite a record A$11 billion profit.

Global shares (unhedged) returned 1.2% over the quarter, supported by continued optimism around AI and corporate profitability. However, escalating Middle East tensions generated renewed volatility. The Iran-US ceasefire collapsed in July, with military strikes resuming and the Strait of Hormuz again closing as a shipping route. US shares reached historic highs in August before drifting lower, while European markets followed a similar pattern. Chinese shares were subdued amid weak consumer spending and ongoing property sector concerns.

Global bonds (hedged) returned -2.4% as rising energy prices, inflation concerns and persistent government deficits pushed bond yields higher. Australian bonds also struggled, returning -1.5%.

Australian shares returned a modest 1.3% over the quarter, although sector performance varied significantly. Healthcare rebounded strongly, returning +25.4%, while Energy benefited from higher oil and gas prices stemming from the Middle East conflict, and Resources gained from stronger metal prices. In contrast, Consumer Discretionary fell 10% and Real Estate declined 8.7% as higher interest rates and weaker consumer prospects weighed on sentiment.

Domestically, persistent inflation and rising interest rates continued to pressure households and consumer spending. The RBA raised interest rates for the fourth time this year in September, with the cash rate now at 4.6%. Housing costs rose 5.7% over the year to August, with electricity prices rising 13.2%, new dwelling costs 5.4% and rents 3.6%. Healthcare and education costs increased 3.9% and 4.7% respectively, while higher mortgage rates also weighed on housing prices.

Looking ahead, escalating geopolitical conflicts, higher energy costs and persistent inflation remain key risks. Major central banks face the challenge of containing inflation without pushing interest rates too high and materially weakening economic growth and global share markets.