OneAnswer KiwiSaver Scheme Sustainable International Share Fund

• Global share markets were mostly higher during the quarter, helped in part by interest rate cuts from several central banks, including the US Federal Reserve and the European Central Bank.
• In the US, the S&P 500 Index rose 5.9%, while the tech-heavy Nasdaq 100 Index added 2.8% – both reached record highs during the quarter (all indices in local currency terms). Meanwhile, the Dow Jones Industrial Average was the best-performing of the major US indices, ending the quarter up more than 8%.
• At a sector level, real estate was a strong performer, benefiting from lower bond yields, while utilities and consumer discretionary also outperformed. The energy sector ended the quarter lower, weighed down by falling oil prices.
• European share markets were also mostly higher, but gains were more muted. The Euro Stoxx 50 recovered from an August sell-off to end the quarter up 2.4%, while the FTSE 100 was 0.9% higher. Meanwhile, Asian markets made a strong comeback late in the quarter after the People’s Bank of China announced a stimulus package to help alleviate deflationary concerns and shore up its flailing property market. The package included interest rate cuts and a reduction in the reserve requirement ratio – the amount of cash banks must hold as reserves – which should free up about 1 trillion yuan for lending. By the end of the quarter, the Shanghai Composite was up 14.3%.
• Contributing positively to fund performance was strong company selection within the consumer discretionary, financials and information technology sectors. In consumer discretionary, the fund benefited from being underweight Amazon.com; the company’s shares dropped over 7% as it reported slowing online sales growth in the second quarter. Elsewhere in the sector, the fund was overweight a number of holdings with double-digit gains, including Gildan Activewear, Home Depot and Lowe’s Companies.
• In financials, some of the fund’s better performers were Hong Kong Exchanges and Clearing (one of the world’s largest exchange groups) and banking companies Bank of New York Mellon Group, State Street Corporation and the UK’s Natwest Group. Meanwhile, in information technology, a notable position was the fund’s underweight to weak-performing semiconductor company ASML Holdings. The company’s shares fell more than 22%, impacted by the prospect of trade restrictions on exports to China by the Biden administration.
• Also benefitting relative performance was an overweight to the strong-performing real estate sector, which made significant gains thanks to interest rates cuts in many of the world’s major economies. Good company selection within the sector also helped, including its holdings in CBRE Group, a worldwide commercial real estate services company, and European shopping mall company, Klepierre.
• Weak company selection within the materials sector and an underweight to the strong-performing utilities sector offset some gains, but did little to impact the fund’s overall outperformance 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.