OneAnswer KiwiSaver Scheme International Share Fund

• US share markets traded higher over the quarter, with the S&P 500 Index and the Nasdaq 100 Index pushing to record highs, while European markets faced pressure amid geopolitical uncertainty. Gains in the US were helped in part by the ongoing Artificial Intelligence (AI) boom, while some progress on inflation also boosted sentiment. In what was a mixed quarter for global shares, the MSCI All Country World Index rose 2.8% (NZD unhedged) over the quarter.
• In the US, the NASDAQ 100 Index rose 8.5% (in local currency terms). Its performance was helped by a strong showing from the technology heavyweights, most notably the ‘Magnificent 7’. The broader S&P 500 Index delivered a 4.3% return. Communications services and technology were the standouts, while materials, industrials and energy were lower.
• Meanwhile, in Europe, geopolitical uncertainty weighed on several European share markets after French President Emmanuel Macron and UK Prime Minister Rishi Sunak called snap elections. France’s CAC 40 Index fell 8.9%, while the Euro Stoxx 50 Index fell 2.1%. However, the UK’s FTSE 100 Index edged higher, up 2.7%, on hopes of interest rate cuts as inflation there came back to within target level. Asian markets were generally weaker too. Japan’s Nikkei 225 Index fell 1.8% after the Bank of Japan ended its zero-interest-rate policy.
• Holding back relative performance was the fund’s underweight to the strong-performing information technology and communications services sectors, exacerbated by weak company selection within them. The fund did not hold Nvidia, Apple or Taiwan Semiconductor Manufacturing. All three delivered double-digit gains, with Nvidia the standout, rising nearly 40% on better-than-expected second quarter earnings. Taiwan Semiconductor Manufacturing also benefited from the AI boom, rising nearly 20%, and Apple shares rebounded to finish up more than 20% after it delivered better-than-expected quarterly earnings.
• It wasn’t all bad news within the sector. Holdings in Tyler Technologies and Onto Innovation were beneficial to performance. Tyler Technologies is a public sector software company, while Onto Innovation is a US-based semiconductor company. Their shares were up 16% and 19% respectively. Within the communication services sector, not holding Alphabet and Tencent was detrimental to performance, with shares in both soaring on AI euphoria.
• Weak company selection within the healthcare sector also hurt performance. Charles River Laboratories saw its shares down 25%. The fund also had a nil holding in Eli Lilly, whose shares jumped 14% after it raised its full-year guidance on strong sales of two new drugs.
• On a more positive note, the fund’s underweight to the energy sector was beneficial given the weak performance of this sector on the back of falling oil prices. Underweight positions to a pair of poor-performing consumer discretionary companies also helped. Home Depot shares fell after it delivered weaker-than-expected first quarter earnings as consumers pared back discretionary spending while interest rates remain high. Meanwhile, car manufacturer Toyota saw its shares fall against the backdrop of a weak Japanese share market.

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.