Summer Global Equities

How did your portfolio perform?
The Summer Global Equities Fund (the fund) delivered a return after fees and before tax of 2.70% for the month of July, considerably outperforming its benchmark* return by 4.85%. For the 12 months to the end of July, the fund delivered a return after fees and before tax of 17.85% underperforming its benchmark* return by -4.38%.

All three managers outperformed the benchmark in July. Our minimum volatility manager benefited from a strong performance in value and low-risk stocks. The Global Factor Portfolio modestly outperformed, supported by its small tilt to value. Our thematic growth portfolio outperformed, reflecting its more defensive positioning over the year.

We actively manage the Fund’s foreign currency exposures. During the month, the New Zealand dollar rose against the US dollar and Japanese yen but fell against the euro. Active hedging added to overall portfolio performance.

What happened in the markets you invest in?
Global equities generated negative returns in July when measured in New Zealand dollar terms. Developed markets were largely unchanged, while emerging markets lagged due to weakness in semiconductor manufacturing and related supply chains, which many emerging markets now have significant exposure to. The UK market outperformed most developed peers, benefiting from its relatively low Technology sector weighting and stronger Energy stock performance as oil prices moved higher. Japanese equities were broadly flat over the month.

Despite a strong second-quarter earnings season, the S&P500 closed July broadly flat. With 73% of the S&P500 (by market capitalisation) having reported, earnings have marginally beaten expectations and by more than the historical average. Earnings per share for 2026 are on-pace to grow 25% year-on-year with Technology and Energy sectors leading the broader market growth.
Semiconductor stocks weakened during the month as several AI-related companies underwent valuation-driven corrections following exceptionally strong share price performance earlier in the year. Despite ongoing strength in AI demand, positive earnings momentum and constructive guidance, investor expectations had become increasingly demanding. Consequently, share prices declined in some cases as outcomes, while strong, failed to exceed the elevated expectations already reflected in valuations.

US short-term interest rates remained unchanged following the Federal Open Market Committee (FOMC) meeting. Two- and 10-year Treasury yields moved higher as markets repriced higher inflation and resilient economic data, while higher energy prices reinforced persistent price pressures. Global bonds were broadly flat over the month.

What are we thinking about the future?
The Investment Committee reviews the underlying managers in real time to ensure the fund can meet its objectives.

Following a detailed assessment of manager performance, the Investment Committee determined that the concentrated Wealth Management Portfolio, which typically holds 30 stocks or less, has not achieved the desired level of risk-adjusted performance over time. By comparison, our more diversified global equity managers, holding between 80 and 100 stocks, have delivered stronger returns while maintaining a more consistent risk profile. Consequently, the Committee has exited the Wealth Management Portfolio and reallocated proceeds equally between the Te Ahumairangi minimum volatility portfolio and the Global Factor Portfolio.

Our longstanding view remains that the investment implications of AI are significant, but the dispersion of potential outcomes across beneficiaries of the theme is exceptionally wide. This makes forecasting the eventual winners and losers inherently difficult. The Global Factor Portfolio therefore employs a disciplined portfolio construction framework with explicit risk controls designed to reduce concentration risk. The portfolio maintains measured exposure to selected AI-related opportunities while complementing these positions with attractively valued companies in areas such as healthcare and biotechnology, where current valuations offer favourable long-term return potential.

*The benchmark for the fund is the MSCI ACWI Net Total Return Index, 50% hedged to the NZ dollar.