OneAnswer KiwiSaver Scheme Sustainable 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. 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. Meanwhile, Asian markets were better performers, with Japan’s market up, supported by a weaker yen.
• The main detractor from relative performance over the quarter was weak company selection within the information technology and consumer discretionary sectors.
• In information technology, the fund was underweight to high growth companies, Broadcom, Palantir Technologies and Salesforce, which were among some of the better performers within the sector. Broadcom, a chipmaker, saw its market capitalisation soar through the US$1 trillion level for the first time, after it reported a jump in artificial intelligence (AI)-related revenues and projected ongoing growth in the field. Its shares were up 52%. Palantir, a software company that specialises in data analytics, saw its shares up over 130% after the company reported record quarterly results.
• In the consumer discretionary sector, the fund was underweight to some of the key contributors to the sector’s strong performance, including electric car maker Tesla (whose shares were up more than 50%), and ecommerce company Amazon.
• Some weak company selection within the financials sector also held back relative performance. It included not holding Wells Fargo (one of the better-performing banks), an overweight position to Toronto-Dominion Bank, and an underweight to strong-performing credit card company Visa.
• It wasn’t all bad news. The fund was underweight to some of the bigger names in the weak-performing healthcare sector. The healthcare sector struggled following news that Donald Trump had nominated vaccine-sceptic Robert F Kennedy Jr. to head up the Department of Health and Human Services. Underweight positions in UnitedHealth Group and Eli Lilly were amongst the largest positive contributors over the quarter.

The fund invests mainly in international equities with a focus on environmental, social and governance (ESG) considerations. Investments may include:

• Equities in companies that are listed on a recognised 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.