OneAnswer KiwiSaver Scheme Australasian Share Fund

• New Zealand shares finished the quarter modestly higher, with the NZX 50 up 2.8%, which moved the market into positive territory over the past 12 months. However, its return lagged those of its global counterparts. The underperformance came in part to ongoing inflation worries, with the rate of inflation one of the highest in the developed world at 4.7%. Even more concerning is the level of non-tradeable inflation, which sits at 5.9%. This is domestically generated and can be more challenging to bring down. Adding to the broader economic worries was news the economy entered a recession in the final quarter of 2023, with GDP growth declining 0.1%. 
• At a sector level, consumer staples outperformed all other sectors over the quarter (+29.2%) while communication services (-3.8%) performed the worst. Real estate also struggled against the backdrop of higher bond yields.
  
• The Reserve Bank of New Zealand left the Official Cash Rate (OCR) unchanged at 5.50%. It also delivered a somewhat dovish statement, with the central bank lowering its forward track – the rate it expects the OCR to peak – to 5.60%, down from 5.69%, implying a less-likely chance of further interest rate hikes.
  
• Meanwhile, in Australia, share markets had a good start to the year, with the ASX 200 ending the quarter up 5.3%. While the index outperformed the NZX 50, it was also behind global share markets, largely due to weakness in the mining sector, which struggled against the backdrop of falling iron ore prices. 
  
• Our position to Goodman Group highlighted fund performance, with shares in the company rising more than 35%. It saw strong gains after reporting a 29% increase in 1H FY24 operating profit – a good result given the headwinds of higher interest rates the sector has faced.
  
• Elsewhere, the fund’s holding in medical devices company Resmed was another positive contributor to performance over the quarter. Its shares rose more than 20% after the company delivered a second quarter result well ahead of expectations. Revenue increased 12% to US$1.2 billion, while its adjusted operating profit was up 20%. Management revealed this strong result was driven by double-digit growth across its combined device, masks, and accessories, and residential care software businesses. 
  
• Other contributions including non-holdings of poor-performing Kathmandu Brands and Heartland Group. Shares in Kathmandu fell more than 25% over the quarter after the company announced a 14.5% drop in group sales during the six months to end January. This slump coincides with a general downturn in consumer spending as New Zealanders close their wallets amid a cost-of-living crunch. Meanwhile, shares of Heartland fell nearly 10% over the quarter. 
  
• On the other hand, an underweight position to a2 Milk detracted from fund performance, with its shares rising nearly 50% over the quarter, making it the best-performing company in the NZX 50 after it reported first half 2024 earnings that comfortably beat expectations. Despite declining birth rates in China – the company’s primary market – it was still able to grow its infant milk formula (IMF) sales over the period.
  

The fund invests mainly in New Zealand and Australian equities. Investments may include:

• Equities in companies that are listed or intend to list on the New Zealand or Australian stock exchanges
  
• Cash and cash equivalents.

This chart shows the mix of assets that the fund generally intends to invest in – 100% equities.

See the fund's actual investment mix on page 3 of the fund update.