OneAnswer KiwiSaver Scheme Sustainable International Share Fund

Global equity markets posted strong gains this quarter, with several indices hitting record highs, driven by AI-related momentum and robust corporate earnings.

In the US, the S&P 500 Index and Nasdaq 100 Index both hit record levels, rising 8.1% and 11.4% respectively. Although 10 of the 11 S&P 500 sectors finished the quarter in positive territory, it was again the ‘Magnificent 7’ stocks that drove market returns, contributing to over 60% of the S&P 500 gains in the quarter.

The US Federal Reserve cut rates by 25 basis points in September, citing a softening labour market and elevated uncertainty, which helped support equity markets. Elsewhere European markets also posted positive returns, though they underperformed relative to the US, partly due to political uncertainty in France after Prime Minister François Bayrou was ousted after a failed confidence vote. At the same time, the European Central Bank opted to keep rates unchanged throughout the quarter.

Meanwhile, Asian markets delivered standout performances. Japan’s Nikkei 225 Index posted double-digit gains, while China’s Shanghai Composite Index surged 12.7% to a 10-year high, driven by robust gains in AI-related sectors.

The manager follows an active and systematic approach to investing in 200-250 high-quality companies that have strong and profitable businesses. This approach is complimented with a responsible investing overlay which seeks to reduce exposure to companies that score poorly on environmental, social and governance considerations as well as lower carbon emissions.

Positive fund performance was driven in part by overweight positions to Agnico Eagle Mines, Kinross Gold Corporation and Newmont Corporation, with their share prices rising 44%, 63% and 45% respectively. All three benefited from the surge in gold prices, which were up more than 20% over the quarter, trading to a record high near US$4,000 ounce. Year-to-date, gold prices have gained about 50%.

Other contributors included the fund’s overweight to strong-performing tech companies, including Apple, Lam Research and AppLovin. Apple shares were up more than 20%, benefiting from ongoing optimism in the technology and AI sector AppLovin shares surged more than 100%, driven by a sharp increase in revenue amid rising demand for AI-powered software solutions in advertising, marketing and analytics. Furthermore, the company was added to the S&P 500 Index in September, which would see it benefit from passive index buying.

Offsetting some performance was underweight positions to strong-performing Tesla and Oracle. Oracle shares gained after it increased its forward guidance for its cloud infrastructure business, citing AI demand and news it would be signing contracts with some major customers in the near future.

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.