OneAnswer KiwiSaver Scheme International Share Fund

• Global share markets enjoyed a strong finish to the year, driven by the outperformance of the US region. US shares rallied on optimism that Donald Trump’s return to the White House would be good for local businesses. All three of the major indices registered all-time highs, before falling back in the final few weeks following December’s Federal Reserve (the Fed) meeting, where the central bank scaled back its expectations for future rate cuts. While the S&P 500 Index and Dow Jones Industrial Average delivered solid gains, leading the charges was the tech-heavy Nasdaq 100 Index. At a sector level, consumer discretionary companies were the strongest, followed by communication services, while at the opposite end of the spectrum, materials and healthcare were the worst performers.
• In Europe, share markets declined (in local currency terms). Eurozone growth – while still expanding – lags the US and is expected to be impacted by Trump’s protectionist policies. With inflation continuing to decline, the European Central Bank (ECB) cut interest rates a further two times, each by 25 basis points, but this did little to lift its share markets. In the UK, the market also fell, as a rebound in inflation prompted its central bank to pause its recent rate cutting cycle.
• Asian markets were better performers. Japan’s share market rose supported by a weaker yen. Meanwhile, China’s Shanghai Composite Index also gained as its central bank made cuts to its loan prime rates in moves designed to stimulate its economy.
• Contributing positively to relative performance was strong company selection within the fund’s industrials holdings. Two of the better performers were Rockwell Automation and Broadridge Financial Solutions. Rockwell, which provides its customers with industrial automation and digital transformation solutions, saw its shares sharply higher, while Broadridge, a US-based fintech company, gained about 20%.
• A number of the fund’s information technology holdings were also notable performers. The fund was overweight to Shopify, DocuSign and Taiwan Semiconductor Manufacturing Company (TSMC), with all three finishing the quarter with double-digit gains. Ecommerce company, Shopify, rose on the back of a solid third-quarter result while DocuSign, an e-document software provider, saw its shares soar after it too posted a better-than-expected result and raised its full-year guidance. TSMC, a key supplier to Nvidia and Apple, reported a 54% jump in net profit in the third quarter on the back of AI (artificial intelligence) demand.
• However, it wasn’t all good news within the sector. The fund was underweight Broadcom, Apple, Nvidia and Alphabet, all market heavyweights that enjoyed share price gains over the quarter. Broadcom, a chipmaker, saw its market capitalisation soar through the US$1 trillion level for the first time, after it reported a jump in AI-related revenues and projected ongoing growth in the field. This ultimately held back the fund’s relative performance.
• Also detrimental was company selection within the consumer discretionary sector. The fund was underweight to some of the key contributors to the sector’s strong performance, including Tesla (whose shares rose more than 50%) and Amazon. There were some positives within the sector though. The fund was overweight to Deckers Outdoor, a holding in our relatively new Blackrock-managed strategy. Deckers is a footwear company that owns and markets the UGG, Hoka and Teva brands, among others. Its shares rose after reporting an almost 40% increase in second-quarter earnings and as it enjoyed good momentum heading into the holiday shopping season.

The fund invests mainly in international equities. Investments may include:

• Equities in companies that are listed or are soon to be listed on a stock exchange
• 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.