OneAnswer KiwiSaver Scheme Sustainable International Share Fund

• It was a volatile start to the year for global share markets, driven largely by President Donald Trump’s trade policy announcements. Several US share markets traded to record highs during the quarter, but a weak March saw them end the period lower. The S&P 500 Index fell 4.3% (all returns in local currency terms) and the Nasdaq 100 Index dropped 10.3% due to ongoing concerns about new AI developments.
• The market was weighed down by the uncertainty surrounding US trade policies, which included new tariffs on imports from China, on-again/off-again tariffs on Mexico and Canada, and the threat of retaliatory tariffs on many of its trading partners. Meanwhile, economic data showed mixed signals, with inflation remaining elevated at 2.8% in February, and GDP growth estimates being revised downwards.
• European share markets showed resilience, however, with the Euro Stoxx 50 Index up a solid 7.5% and the UK’s FTSE 100 Index gaining 6.1%. Both markets saw some robust earnings announcements from key constituents, while also continuing to benefit from supportive monetary policy conditions given interest rate cuts from both central banks. In Asia, Japan’s Nikkei 225 Index was down 9.9% on worries about US tariffs and their economic implications, while China’s Shanghai Composite Index fell only 0.2%.
• Holding back relative performance was weak company selection in the healthcare, industrials and consumers staples sectors.
• In healthcare, the fund was overweight to weak-performing Illumina and Novo Nordisk, and underweight to the better-performing Abbott Laboratories and Eli Lilly. Biotech company Illumina fell 40%, following mixed fourth-quarter and full-year 2024 results, and as the company became the target of retaliation by China in its clash with the US over trade and tariffs. Meanwhile, pharmaceutical company Novo Nordisk was affected by broader market volatility and as it said it was delaying seeking approval for some of its new products. Abbott Laboratories and Eli Lilly did well following successful product launches, innovative drug approvals and strong reported sales performance.
• In industrials, the fund does not hold GE Aerospace, Siemens Aktiengesellschaft or Rheinmetall, as these companies do not meet our responsible investing criteria. They all saw solid gains as European defence stocks had a stellar quarter, given ongoing geopolitical uncertainties. In consumer staples, not holding Philip Morris International (also on responsible investing grounds) and Nestlé was detrimental as both delivered strong gains given the defensive nature of these companies.
• It wasn’t all bad news. Contributing positively to relative performance were strategic underweight positions to electric carmaker Tesla and semiconductor company Broadcom. Tesla shares fell more than 35% in the first quarter on the back of falling sales as well as protests and boycotts related to Elon Musk’s role in the Trump administration. Moreover, Tesla is expected to face headwinds from the automotive tariffs because the company has key suppliers in China. Meanwhile, Broadcom shares fell 28% on the back of broader volatility in the information technology sector on AI-related concerns.

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.