Commentary on Performance

Market Review:
Despite a strong start to the year, market returns struggled in March. Investors grew increasingly concerned about the Iranian conflict. Risks to AI-exposed business models also continued to weigh on software stocks and the private credit lenders to these exposed sectors. In this challenging market environment, “Real Assets,” Infrastructure, and Property delivered positive returns for the quarter. The Energy and Utilities sectors drove gains in Australian equities, with BHP, Woodside, and CBA among the key contributors. In contrast, the Healthcare and Technology sectors detracted from performance, with CSL being the principal negative influence. Overall, Australian equities were slightly negative but still outperformed International equities.

Portfolio Performance:
The portfolio has outperformed its benchmark over the past 12 months whiles also delivering above benchmark income. Most asset classes have contributed to the outperformance, with Australian equities the standout, driven by strong performance from Woodside, Aurizon, and Woolworths. The Australian equities portfolio has generated over 3.9% dividend income (unfranked) over the past 12 months. Within global equities, currency-hedged Betashares Global Shares (ASX:HGBL) has benefited from a stronger AUD while Plato Global Share Income continues to deliver on income (5.5%) and benchmark outperformance.

Portfolio Changes:
There were several changes to the portfolio this quarter. In Australian equities, CAR Group, Seek, and Westpac were added, while Dexus, Telstra, and Metcash were reduced post-dividend season. RQI Global Value was added to International equities; the value-focused strategy carries an attractive dividend yield. The position was funded by reducing currency-hedged exposure (ASX:HGBL), which had performed well as the AUD strengthened vs. the USD.

Outlook:
We entered 2026 with an unusually bullish outlook for the US economy, with our portfolios positioned with an overweight to Property and Infrastructure relative to more defensive exposures. This has largely played out well with these asset classes outperforming. However, since December, the Iranian conflict has impacted our expectations for inflation and interest rates, both in Australia and globally. While we remain positive on the US economy in particular, the altered outlook for interest rates and inflation has tempered our optimism. As a result, we have slightly dialled back our overweight to growth assets, using the proceeds to add to our defensive bond holdings. Across other asset classes, we remain well-positioned to deliver above-benchmark income and capital growth over the medium term.