March was all about the conflict in the Middle East. Israel and the US launched a military strike against Iran, targeting Iranian leaders. Iran effectively shut down the Strait of Hormuz, a crucial shipping route for oil and gas exports from the Middle East. Oil prices shot through the roof (a barrel of Brent crude oil over $100), which saw commodities perform well. However, almost everything else was negative. Government bonds globally experienced a sell-off as those higher commodity prices fuelled worries over inflation and potential interest rate rises. Equity markets globally fell by around 6% collectively but several countries were down over 10% for March.

Energy stocks were the only standout performing sector (particularly in the UK), with integrated producers, refiners and energy infrastructure all benefiting from higher oil prices. US Technology stocks suffered more than other sectors, which was a little surprising, considering many IT companies reported solid revenue growth. The software sector was particularly hard hit. In Europe the economically sensitive consumer discretionary sector was the hardest hit. Unlike in the US, European semiconductors and IT hardware fared better, with positive returns after some well-received corporate earnings. Japan, Asia Pacific and Emerging Markets all suffered from the conflicts in the Middle East, triggering a risk-off sentiment toward energy-importing countries.

New Zealand equities also struggled over the month, with the larger stocks doing slightly better than the smaller cap stocks. The Australian large caps held up much better, although this was centred on a few of the top 20 ranked companies.

The US Federal Reserve kept policy unchanged, and tempered market expectations for imminent rate cuts. The ECB also left is policy rates unchanged, signalling no immediate urgency to alter borrowing costs. The BoE and BoJ also kept policy unchanged, citing tension in the Middle East and uncertainty over oil prices introduced additional risks.

The Iran conflict drove the NZD lower against the USD during the month, falling from 0.60 to around 0.57 (-4.2%). The NZD also continued to fall versus the AUD, now down to 0.83.

The Focused Growth Fund returned –5.91% for March. All the stocks were adversely affected by the conflict in the Middle East. When a major event like this happens, generally, the largest, most liquid, mega-cap stocks are the most sold down. Last month was no exception with Meta down 12.8%, TSMC –9.1%, Eli Lilly –9.9%, P&G –12.2%, Toyota –15.8%, Schneider Electric –11.2%. We believe the Fund is still well positioned to benefit from our major investment themes - the AI megatrend (semiconductors, networking datacentres, cloud infrastructure), and Healthcare Innovation.

The High Growth Fund returned –4.98% for March and –3.35% for the quarter. The main drivers of return for the fund were the conflict in the Middle East in March and the selloff of AI stocks in January. There was nowhere to hide in March, with our investment themes, and underlying managers, all experiencing a retraction in their shareprice/unit price. The only exception was the Energy sector, where our exposure is less than 3%.

Stocks that stood up in this harsh environment over March were Novo Nordisk +7%, Amazon & Telstra +4%, and Infratil, Nvidia, Woolworths, Johnson & Johnson, Bank of America, all up over 3% each. Over the quarter the standouts have been ASML +23.1%, Caterpillar +22.1%, Johnson & Johnson +17.3%, Taiwan Semiconductors +11.5%, Walmart +9.8%.

The Income Fund returned –1.74% for March and is down –0.57% for the quarter. Rising inflation expectations and the likelihood of interest rate rising rather than falling in 2026 triggered the longer dated fixed interest rates to increase (10-year bond rates increased by around 0.3-0.6%), thus causing a large negative return for the Fund. The Fund was slightly protected by holding a shorter duration position versus the market. Going forward our underlying managers thinks rates have gone too far and expect positive contributions from the longer-dated bonds going forward.

The Cash Fund returned +0.18% for the month, similar to the previous month, as short term interest rates have stabilised.

The Lifestages investment profiles across all the Age bands, were negative for March, on the back of negative returns from all four underlying asset classes. Returns ranged from –2.4 to –5.1% for March.