OneAnswer KiwiSaver Scheme Sustainable International Share Fund

• International share markets finished the last quarter of 2023 higher, with the MSCI All Country World Index returning 9.0% (in local currency terms). The main driver was signs of a continued easing in inflationary pressures, suggesting that most of the world’s major central banks are finished with interest rate hikes, while falling bond yields were also supportive of share market valuations.
• In the US, the S&P 500 Index gained 11.7%, edging closer to an all-time high, as markets were buoyed by the prospect of rate cuts by the US Federal Reserve in 2024. Meanwhile, the tech-heavy NASDAQ 100 Index extended its gains by 13.8%, hitting an all-time high in the process. Most other markets took their lead from the US; the Euro Stoxx 50 Index was 8.6% higher and, while Japan’s Nikkei 225 Index underperformed other major markets, it still gained 5.2% as its market hit a new 33-year high in November.
• A key laggard was the UK, which gained only 1.6% given its significant exposure to energy companies, which struggled as oil prices fell. However, the key underperformer was China. The Shanghai Composite Index finished the quarter down 4.2% as a lack of action from the central bank there to stimulate its sluggish economy weighed on sentiment.
• At a sector level, the fund’s underweight to energy proved beneficial to performance over the quarter, as falling oil prices saw many of these companies out of favour. At a company level, underweight positions to ExxonMobil and Chevron were the main contributors, with shares in both companies finishing the quarter with double-digit declines.
• Elsewhere, an overweight position to ASML, which manufactures equipment for chip-making, was another contributor to relative performance, with its shares rising more than 20% over the quarter. In December, the company announced a joint investment of US$760 million with Samsung to build a semiconductor processing plant in South Korea.
• Other contributors included underweight positions to Berkshire Hathaway and Alphabet (the parent company of Google). Although ending the quarter with small gains, both were substantially behind the benchmark.
• Offsetting some gains were underweight positions to some strong-performing tech companies, including Broadcom and Advanced Micro Devices. Both companies finished the quarter with double-digit gains, benefiting from a good end to the year for companies in the semiconductor industry.

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.