Portfolio highlights

As at 31 August 2026: The portfolio delivered a positive return in August. Global shares (hedged) delivered a solid 2.4% return in August as AI-driven optimism and strong corporate earnings pushed US equities to record highs. However, persistent inflationary pressures and rising expectations for further interest rate increases reinforced the growing tension between strong market sentiment, and a more challenging policy backdrop.

The Arrowstreet Global Equity Fund (Hedged) rose 3.6% in August and outperformed its benchmark by 1.2%. Technology holdings Microsoft (+7.2%) and Kioxia (+5.1%) drove performance through their standing as key beneficiaries of the AI infrastructure buildout, which continued to underwrite demand for compute and memory. NVIDIA’s strong results later in the month validated this thesis with quarterly revenue of $96.2 billion and data-centre revenue up an astounding 117% year-on-year. Conversely, the internet platforms weighed heavily with Amazon and Alphabet falling as scepticism persisted over the cash-flow cost of that same buildout, with the latter having turned free-cash-flow negative. A well-timed underweight to industrials partly offset the damage.

The Realm Short Term Income Fund rose 0.5% in August, comfortably ahead of its Cash Rate target. Returns continue to be underpinned by a portfolio spread across corporate bonds, subordinated debt and RMBS/ABS. Persistent Middle East tensions and elevated oil prices kept inflation risk premia firm, reinforcing expectations of further RBA tightening. For a fund of this nature, that backdrop is supportive, since a higher cash rate lifts the income base from which returns are generated. With interest rate duration held near three months and liquidity deliberately high, the Fund remained insulated from bond market volatility while continuing to capture spread and roll-down.

The Life Cycle Concentrated Global Share Fund (Hedged) rose 2.5% over the month. NVIDIA and Microsoft were the month's standouts, both rallying strongly as the AI capex cycle showed no sign of maturing. NVIDIA's late-August result, with data-centre revenue more than doubling on a year earlier, removed lingering doubts about the durability of hyperscaler demand. European financials added a second, less obvious layer of support, with UniCredit advancing and stock selection across the sector contributing meaningfully to relative return. Those gains, however, could not fully absorb the drag from the fund's cyclical holdings. Delta Air Lines and Steel Dynamics both fell sharply, the latter a particularly costly outcome given the strength in materials elsewhere in the market, while Alphabet and Amazon retreated as investors questioned the free-cash-flow cost of the AI buildout.

US share prices reached record highs as optimism surrounding Artificial Intelligence (AI) and stronger-than-expected corporate earnings continued to support investor sentiment. According to FactSet, US companies are expected to deliver annual profit growth exceeding 52% in the June quarter. Major technology companies including Alphabet, Amazon, Microsoft and Nvidia are continuing to increase AI-related investment, supporting both earnings growth and broader economic activity. However, the US central bank warned that interest rates may need to rise further as inflation remains elevated.

Asian share markets delivered mixed returns. Japan, Korea and Taiwan posted strong gains, supported by AI-related optimism, while Chinese shares weakened as consumer spending and housing market activity remained subdued.

Australian shares returned 1.6% in August. Health Care stocks performed strongly following recoveries in CSL and Cochlear, while Resources and Energy companies benefited from higher commodity prices and renewed Middle East tensions. In contrast, Financials and Real Estate lagged as investors grew increasingly concerned that the Reserve Bank of Australia (RBA) may need to raise interest rates again.

Australia’s inflation data disappointed, with the RBA’s preferred Trimmed Mean measure rising to 3.6% in July. Inflation remains above the RBA’s 2% to 3% target range, while resilient household spending has reinforced market expectations that further interest rate increases may be on the way.