
Resilience and flexibility amid economic uncertainty
David Chen, Portfolio Manager, Catholic Values Trust and Income Trust
December 2024 Quarter Update
Performance Overview
It’s been an eventful but fantastic quarter, with several key factors driving Catholic Values Trust and Income Trusts’ strong outperformance.
Our unhedged global equities were a real highlight, delivering gains of over 12%—well ahead of the hedged version, which returned just under 2%. A big driver behind this was the U.S. dollar, which jumped more than 10% against the Australian dollar. This was largely due to President Trump’s re-election and the wave of optimism that followed, with investors expecting pro-growth policies like tax cuts, deregulation, and major infrastructure spending.
On top of that, stronger U.S. economic growth, inflation concerns linked to proposed tariffs, and rising bond yields all played a role. Given our strategic positioning to be unhedged within our global equities allocation, we greatly benefited from the currency moves. Looking at sectors, technology and consumer discretionary were the standouts, riding the wave of AI adoption and the continued shift towards digital spending.
Australian equities faced challenges, declining by 0.8% over the quarter. Rising bond yields, falling commodity prices, and slowing growth in China weighed on the domestic market. Our underweight position in Australian equities helped limit the impact of these headwinds, reflecting our cautious outlook on the local economy.
Finally, higher-for-longer bond yields supported strong performance in the Income Trust portfolio. Elevated interest rates provided attractive coupons on high-quality credit securities, helping the portfolio generate steady income while maintaining capital stability. With inflation remaining sticky and central banks maintaining a cautious stance, our floating rate fixed income allocation should continue to perform well.
Outlook and Portfolio Positioning
As we look ahead, we’re taking a balanced approach—making sure we’re managing risks while still capturing opportunities.
We’re staying underweight in Australian equities. The local market is facing some headwinds, with slowing economic growth, cautious consumer spending, and China’s sluggish recovery putting pressure on our resource-heavy sharemarket.
When it comes to global equities, we’re sitting at an equal weight. Valuations are looking a bit stretched, but there’s strong growth momentum—especially in the U.S., where hopes of tax cuts and infrastructure spending are keeping things upbeat. That said, we’re keeping a close eye on inflation and rising interest rates, which could challenge this outlook.
We’re overweight in fixed income, where we see some great opportunities. With interest rates expected to come down in 2025, this part of the portfolio is well-positioned to provide solid income, stability, and much-needed diversification.
This positioning reflects our focus on staying resilient while remaining flexible to adjust as market conditions evolve.
As we head into 2025, we’re keeping a close eye on inflation, interest rates, and global policy changes that could shape the markets. There’s still a fair bit of uncertainty out there, but we’re also flexible to take advantage of opportunities. Our goal remains the same: to strike the right balance—capturing growth where we can while managing risks carefully.
Why Invest in the Catholic Values Trust & Income Trust?
There are three key reasons why investors should consider investing in the Catholic Values Trust and the Income Trust right now:
Income Stability: For income-focused investors, the Income Trust remains well-positioned to deliver attractive yield outcomes, supported by a diversified portfolio of fixed interest and hybrid securities, particularly in a higher for longer backdrop.
Commitment to Catholic Values: For Catholic investors, financial success and moral integrity go hand in hand. Our funds provide a unique opportunity to grow wealth while adhering to the values of the Catholic faith—focusing on ethical stewardship, social responsibility, and long-term sustainability in alignment with Church teachings.
Strategic Diversification with a Dynamic Approach
Our funds blend a diversified portfolio with dynamic asset allocation strategies to respond to market shifts in real-time. This flexibility helps to reduce downside risk while positioning for potential opportunities, offering investors a balanced path to financial growth.
CLICK HERE TO FIND OUT MORE ABOUT THE TRUSTS.
*The text has been edited for clarity.
The document contains general information only. Reference to either individual securities or other investments should not be considered as investment advice. We strongly encourage you to obtain professional advice before making an investment in securities that have been mentioned. Documents you should consider prior to making an investment could include the relevant Information Memorandum. If you would like further information on financial products that SG Hiscock & Company Ltd (AFSL 240679) is the investment manager for, contact the Client Services team on 03 9981 3300, visit the website www.sghiscock.com.au or contact your financial adviser. Any investment is subject to risk, including possible loss of income or capital invested.