OneAnswer KiwiSaver Scheme Sustainable 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 World ex Australia Index rose 15.42% (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.
  
• The fund has a focus on companies considered to be high quality, with strong profitability, cash flow generation and conservative profitability metrics being a core feature. Those companies considered to be high quality were not in favour during the quarter and lagged the broader market, and this was a drag on performance.
  
• At an individual company level, the main detractor to fund performance was an underweight position to Meta Platforms – the parent company of Facebook. Its shares rose nearly 40%, to a record high and are now up more than 300% since its cycle low in late 2022. Elsewhere, within the strong -performing communications services sector, underweight positions to Walt Disney and Netflix, which gained 43% and 32% respectively, also held back relative performance.
  
• On a positive note, the fund benefitted from overweight positions in two key players in the AI market, led by high-flying Nvidia. Shares in Nvidia continued their stellar run over the quarter, rising more than 80% as the AI boom showed no signs of slowing. The company has been a beneficiary of the AI rally with many models and platforms developed using its popular graphics processing units. Adding to positive sentiment around the company was its better-than-expected Q4 2023 earnings, which included a 265% increase in revenue and upbear guidance.
  
• Meanwhile, another benefactor of the AI rally has been Dutch semiconductor company, ASML Holding. The fund’s overweight to the company meant it was another solid contributor to performance, with its shares rising more than 30% 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.