OneAnswer KiwiSaver Scheme International Share Fund

• International share markets had a strong start to the year, driven in part by the ongoing artificial intelligence (AI) boom, which saw indices in most major markets reach new highs. Against this backdrop, the MSCI All Countries World ex Australia Index rose 14.67% (NZD unhedged) over the quarter.
• In the US, the S&P 500 Index rose 10.6% (all returns in local currency terms), while the NASDAQ 100 was up 9.3%. Communications services and information technology were the two standout sectors, while energy stocks also had a good quarter, buoyed by rising oil prices.
  
• Meanwhile, in Europe, inflation fell to its lowest level since 2021, propelling several share markets within the region to record highs – some finishing the quarter with double-digit gains. The best-performing was the Euro Stoxx 50 Index, which ended the quarter up 12.8%.
  
• In Asia, Japan’s Nikkei 225 Index remained one of the best-performing share markets over the quarter. It rose 21.5%, helped in part by a revitalisation of the local economy, which has been stuck in deflationary periods over the last decade. Meanwhile, in China, the Shanghai Composite Index finished the quarter slightly higher, but remained one of the weakest global share markets as its property sector continues to pose headwinds.
  
• It was a challenging period for the fund, with three out of four of the fund’s underlying managers underperforming the market’s return. Holding back relative performance were the fund’s underweight positions to the strong-performing information technology and communications services sectors, exacerbated by weak company selection within them. In particular, an underweight to Nvidia was a notable detractor as its shares continued to soar to new highs following a strong earnings announcement during the quarter. Meta Platforms (owner of Facebook) and Microsoft were other notable detractors.
  
• While the underweight to the information technology sector was a drag on relative performance, its positioning in some other companies within the sector was of benefit. It included an underweight to Apple, whose shares fell on the back of disappointing news flow out of China. The fund was also overweight to Taiwan Semiconductor Manufacturing (a competitor to Nvidia), Oracle and Dell Technologies, which all did well.
  
• The fund’s long-standing holding in Indian retail bank HDFC Bank weighed on performance. Its shares fell following disappointing third quarter 2023 earnings, as the company reported slower deposit growth and flat net interest margins (the difference between interest paid on deposits and interest received on lending).
  
• Two of the fund’s holding in the healthcare sector also disappointed, with Inari Medical and Humana both seeing falls in their share prices. Health insurer Humana Inc warned that higher medical costs and government regulations are set to negatively affect its results through 2025, while Inari Medical was lower despite reporting a significant increase in revenues, as it said operating losses had widened due to acquisition-related costs and increased operating expenses.
  
• However, it wasn’t all bad news. An underweight to the weak-performing real estate sector (which fell on the back of rising bond yields), and strong company selection within the utilities and energy sectors added to performance in the quarter. Other notable contributors were an underweight to Tesla, which fell more than 25% after reporting weak sales, and an underweight to Boeing, which continued to suffer on the back of poor news flow following safety-related concerns.
  

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.