Portfolio highlights

The Portfolio generated a positive return for the December quarter, with global shares (hedged) delivering a solid 3.6% return. The Australian dollar’s rise against the US dollar, euro and Japanese yen reduced global shares (unhedged) to a 2.7% gain. Optimism on Artificial Intelligence (AI) prospects and lower US interest rates have been key drivers of rising share prices this year. Investors have also taken the view that President Trump’s tariffs are just a temporary threat in terms of higher US inflation and penalising US economic growth.

The Polaris Global Equity Fund outperformed its benchmark (2.9%) over the quarter. Positive sector contributors were Technology, Healthcare, and Industrials. Key positive stock contributors were SK Hynix and Samsung Electronics. SK Hynix’s strong performance reflected surging demand and pricing for memory chips tied to AI data‑center build‑outs.

The Resolution Capital Global Listed Infrastructure Fund outperformed its benchmark (3.7%) over the driven by key positive sector contributors such as Utilities and Industrials. Top positive stock contributors were SSE plc and Italgas. SSE’s strong quarter coincided with a strategic update announcing a fully funded, multi‑year investment plan focused on UK electricity networks and renewables.

Wall Street’s benchmark S&P 500 Index made historic highs with a quarterly gain of 2.6% in local currency terms. Investors have also taken the view that President Trump’s tariffs are just a temporary threat in terms of higher US inflation and penalising US economic growth.

Asian share markets also delivered some impressive performance. Korea (30.7% return) and Taiwan (13.8%) posted very strong returns over the past three months in local currency terms. Japan’s share market delivered a 9.6% return even with the central bank raising interest rates in December. However, Chinese shares disappointed with a -7.6% return after a strong rally in the previous six months.

Global bonds (hedged) delivered a modest 0.7% quarterly return. Concerns over persistent government budget deficits and rising Japanese interest rates countered the benefit of the US central bank lowering interest rates in December. Australian bonds delivered a weak -1.1% quarterly return. Recent high inflation results have seen bond markets begin to contemplate that the Reserve Bank (RBA) could raise interest rates in 2026.

Australian shares delivered a disappointing setback with a mildly negative -0.9% return for the quarter. The Information Technology sector was the primary source of weakness with a -23.7% quarterly return given Wisetech and Xero’s poor performances. The Health Care sector also proved frail with a -9.5% return given the continued weakness in CSL. In a welcome contrast, the Materials sector was one of the few bright spots with a very strong 13.0% return on the back of rising gold and metal prices.

Australia’s economy is experiencing improved consumer spending, modest jobs growth and a stable unemployment rate around 4.3%. However, consumer inflation is proving persistent at 3.8% in the year to October. The prospect of further RBA interest rate cuts has evaporated with this pickup in inflation pressures.