OneAnswer KiwiSaver Scheme International Share Fund

Global share markets closed the year on a positive note, although performance varied by region. In the US, major indices posted solid gains, with the S&P 500 and Nasdaq Composite both up 2.7% over the quarter, while the Dow Jones Industrial Average outperformed, up 3.6%.

AI-driven momentum eased, as investors rotated into sectors such as financials and industrials. The Federal Reserve cut interest rates twice, supporting markets while maintaining a data-dependent stance amid signs of cooling inflation.

Europe delivered standout returns. Easing inflation boosted sentiment, driving the FTSE 100 up 6.9%, France’s CAC 40 up 3.6%, and the Euro Stoxx 50 up 5.0%, with several indices reaching record highs. Reduced political tensions further supported confidence.

Meanwhile, Japan’s Nikkei 225 extended its strong run, delivering quarterly double-digit gains and a 12-month return of 28.7%. Japanese shares benefited from a weaker yen, corporate reforms, and improved business outlook following the election of Sanae Takaichi as prime minister.

Manager performance largely mirrored broader market trends. The relative underperformance of growth-oriented technology stocks was supportive of the Fund’s value manager, LSV, who comfortably outperformed the benchmark. In contrast, Vontobel Asset Management experienced a more challenging period. Following a period of ongoing review, the Manager decided to transition away from Vontobel in late November.

The fund’s overweight in financials added value, with strong contributions from Bank of New York Mellon, State Street Corporation, Banco Santander, and Prudential Financial.

Cooling sentiment toward artificial intelligence-related stocks also aided relative performance, with members of the so called ‘Magnificent 7’ experiencing mixed outcomes during the period.

The fund’s underweight positions to Microsoft, Meta Platforms (the parent company of Facebook) and Oracle were key benefactors. Microsoft shares dipped about 5%, Meta shares were down nearly 10% and Oracle saw the steepest drop – down more than 25% – after reporting weaker-than-expected quarterly revenue growth and announcing a 40% increase in AI capital expenditure, which raised concerns about profitability.

Conversely, semiconductor‑related holdings performed strongly. Overweight positions Lam Research and Applied Materials gained 30% and 25% respectively.

The main drag on performance came from healthcare stock selection, notably an overweight in Eli Lilly and an underweight in Veeva Systems. Eli Lilly shares surged about 40% to a record high on blockbuster earnings driven by its obesity drug, tirzepatide. Meanwhile, Veeva Systems fell more than 20% after announcing it would not retain all biopharma clients during its migration to the new Vault CRM platform.

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.