Portfolio highlights

The Portfolio generated a positive  return for the March quarter, with global share markets are now facing considerable global political risks. President Trump’s aggressive policy agenda - higher tariffs, lower US immigration with “mass deportations”, more restrictive US fiscal policy with cuts to government jobs and spending, as well as less regulation - is not a recipe for stability.

The Polaris Global Equity fund performed strongly over the quarter, outperforming its benchmark by 5.55%. The fund benefitted from diversification away from US centric technology stocks, and holding an array of cash flow generative companies with strong underlying balance sheets. The Resolution Capital Global Listed Infrastructure fund was the strongest positive performer over the quarter, producing an absolute return of 6.14%, beating out its benchmark by 1.09%. The strategy was supported by falling bond yields, yield generation from real-assets, and strong stock selection over the quarter.

Wall Street’s benchmark S&P 500 Index briefly made historic highs during the quarter, but these gains were fully reversed by tariff concerns and the potential for higher consumer inflation. The NASADAQ 100 which is heavily weighted to technology declined by -10.3% over the quarter. European shares surprised by making very strong returns of 7.2% (EuroSTOXX 50) with the benefit of the European Central Bank cutting interest rates and Germany announcing major stimulus measures to revive their economy. Chinese shares delivered a very strong return over the quarter with more supportive financial measures from the government. However, Japanese share markets have declined with the central bank still signalling the need to raise interest rates to limit inflation.

Australian shares initially made strong gains and historic highs until the middle of February but then hit reverse gear. Australian shares delivered a disappointing return of -2.9% over the quarter. The Information Technology sector was a key negative contributor with a -18.2% return. There were notable declines in property securities as a subdued Australian economy weighed on investor confidence. There were also sharp falls in the Health Care and Financial sectors.

Australia’s economy is experiencing mild economic activity but is seeing lower inflation. The negative impact of high consumer prices and mortgage interest rates as well as rising rents continues to squeeze budgets. Yet there has been some more encouraging news on inflation and interest rates. Australia’s annual inflation rate declined to 2.4% in February according to the ABS monthly indicator. This moderation in price rises reflects the benefit of government electricity rebates and lower automotive fuel costs. Given modest Australian economic activity and milder inflation results, the RBA cut interest rates in February 2025.

Global bonds (hedged) delivered a modest 1.1% quarterly return. While lower interest rate settings in Europe are positives, investors have taken a more cautious outlook on inflation prospects given that tariffs initially raise consumer prices. Australian bonds delivered a solid 1.3% return given that recent lower inflation results allowed the RBA to cut interest rates in February 2025.