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 ASX Top 20 Direct Replication Portfolio rose 1.6% in August. BHP (+139bps) and CSL (+121bps) provided the strongest support. CSL rallied as investors looked through substantial impairments towards resilient plasma demand, cost savings and guidance for approximately 5% underlying profit growth. BHP advanced after reporting record iron ore output, stronger commodity prices and a 27% increase in underlying EBITDA, with copper contributing more than half of earnings for the first time. Conversely, CBA and Westpac detracted as investors focused on emerging signs of credit stress, with higher arrears and impairment charges offsetting otherwise solid earnings results.

The Resolution Capital Global Listed Infrastructure Fund outperformed its benchmark by 1.4% over the month. High conviction positions in H2O America and SSE both advanced, and an overweight to Black Hills Corp added further value in a sector that fell sharply at the index level. NiSource was the notable exception, sliding 9.7% after an adverse Indiana regulatory decision on gas cost recovery compounded a weaker quarterly result. Canadian National Railway also detracted amid subdued freight sentiment. With bond yields elevated through August, long-duration regulated assets remained under pressure in a backdrop in which the manager's selectivity, rather than sector positioning, drove the outcome.

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.