Catholic Values Trust & Income Trust update – June Quarter 2026

In this quarterly update, David discusses the strong June quarter, the impact of easing geopolitical tensions and falling bond yields, and how these factors contributed to the performance of the Catholic Values Trust and Income Trust. 

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Transcript:

June quarter performance

Quarter to 30th of June, Catholic Values Trust returned 7.23% net of fees, the Income Trust, 1.94% net of fees. A big turnaround from March, honestly. Once the geopolitical picture began to ease, markets surged as sentiment improved. Here’s what happened. There was a ceasefire in early April, and then on the 17th of June, the US and Iran signed the memorandum of understanding. Oil dropped more than 30% on the back of it, down to around US $69.50 a barrel, basically back to pre-war levels. And once that inflation risk was removed from the market, sentiment recovered quickly. Equities had an extremely strong quarter. The ASX 200 was up over 4%, which got the financial year to about 7.4%. Offshore was even better. Our global equities allocation was up over 18%. The US did well, but Japan was the real standout. The Nikkei returned around 37% or 38% for the quarter, off the back of strong AI-related earnings and a softening Japanese yen, which supported export earnings. And locally, A-REITs were the best performer by far, up 13.7%, helped by falling bond yields and the RBA finally pausing after three hikes earlier in the year.

For the Catholic Values Trust, that’s really the story: equities rallying hard both here and offshore, plus a strong rebound in property. For the Income Trust, it was the hybrids that did the heavy lifting, delivering strong coupon income plus further spread tightening. And the fixed-interest book benefited too as yields fell. Markets also pared back their interest rate expectations through the quarter. We went from pricing in a decent chance of another hike by year-end to now just under a half chance of one more rise. That repricing helped pull bond yields lower. On top of that, as the Iran situation de-escalated, oil prices came off, and that took a lot of the recession risk out of the market’s thinking. Lower recession risk means credit spreads tighten, and that’s exactly what happened. The technicals were strong too. There just wasn’t much new bond supply around in June, and, coupled with a few larger bond maturities that were put into the secondary markets. The iTraxx index, our credit risk gauge, tightened from around 84 basis points to 68 over the quarter. So overall, rate expectations eased, spreads tightened, and yields dropped, and that’s what drove the strong result.

Current portfolio positioning

We’re still running things overall in a mildly defensive manner. In the Catholic Values Trust, that means we’re a little underweight in Australian equities, still neutral on global equities, and modestly overweight in fixed income to add to our overall portfolio protection. And we’re being pretty picky on credit quality now, given how tight spreads have gotten. In the Income Trust, not much has changed this quarter. We’re still mainly invested in high-quality floating-rate bonds, a combination that keeps the income coming without taking on too much duration risk.

Why should investors consider the Catholic Values Trust and Income Trust right now?

1. Income. Steady, consistent, and above what you’d get in cash or term deposits, and that’s really the Income Trust’s whole job and purpose.
2. Values. Both apply the Catholic Values Policy, and there’s independent oversight from the Catholic Values Advisory Board.
3. It’s how we manage it. This isn’t a set-and-forget. We’re actively shifting positioning as things change, which matters a lot right now given how uncertain the investment environment has become.