Portfolio highlights

As at 31 May 2026:

The portfolio produced a positive return for the month. Global shares made new highs in May. Optimism over Artificial Intelligence (AI) prospects, strong US corporate profits and hopes for the end of the Iran War have been the key drivers of rising share markets, however domestic markets are still weary of Federal Budget impacts and continued inflationary pressure.

The Arrowstreet Global Equity Fund (Hedged) outperformed its benchmark by 2.0% over the month and was the portfolio’s strongest alpha contributor. Technology was the dominant driver of performance rising 19.3% on a stock level. Consumer Defensive and Industrials also added value. These gains were partially offset by weaker outcomes in Healthcare, Consumer Cyclical and Energy, where selection detracted. At the stock level, Kioxia Holdings and Apple were the leading contributors, with Kioxia supported by strong AI-driven memory demand and earnings momentum.

The Polaris Global Equity Fund outperformed its benchmark by 0.3% over the month. Technology was the dominant contributor, with holdings rising 40.6%, supported by positions in SK Hynix and Samsung Electronics. SK Hynix benefited from exceptional demand for high-bandwidth memory used in AI infrastructure, driving record earnings and strong forward demand; sentiment within the company is strong too, with staff bonuses tipped to exceed $1.3bn Won per employee on average. Samsung similarly gained from the broader AI-led memory cycle, with improving pricing and profitability across its semiconductor segment underpinning strong share price performance.

The MLC Real Return fund outperformed its benchmark by 1.6% in May. The fund utilised cost-effective derivatives strategies to reduced risk immediately after the US began attacks on Iran by selling global equity futures and removing the duration overlay. Towards the end of March, the Fund began to re-build risk exposure, firstly by adding calls over the NASDAQ and emerging markets. Secondly, buying NASDAQ futures and a S&P500 ETF and built out the position in Japan by adding Topix futures.

US share prices have skyrocketed given robust corporate earnings and AI enthusiasm. US companies are recording their highest annual profit rise of nearly 29% since 2021 according to Factset. The largest US technology companies such as Alphabet, Amazon, Microsoft and Nvidia are rapidly increasing their AI capital investment which is also supporting economic activity. However, US inflation pressures are building given the Iran War’s impact in raising key commodity prices such as oil and fertiliser.

Asian share markets delivered a mixed performance. Japanese and Korean shares delivered strong gains as optimism on AI and broader technology proved to be beneficial. However Chinese shares disappointed with weaker industrial production and retail spending weighing on investor sentiment.

Australian shares made modest gains in May. Concerns that the Australian central bank raised interest rates in May restrained share gains. There were some weak performances from market heavyweights such as CSL. The Health Care sector posted a painful -8.9% return given CSL’s sharp fall. The Utilities sector (-7.6%) also disappointed with higher energy prices squeezing profit expectations. A more encouraging performance was seen in the Resource sector (7.8%) where higher commodity prices boosted profit estimates.

Australia’s economic data is subdued with employment and household spending slowing but inflation remaining stubbornly high. Headline consumer inflation came in at 4.2% in the year to April. Accordingly, markets are still expecting that the Reserve Bank of Australia (RBA) may again raise interest rates this year to restrain price pressures.