Page 3 - Private Wealth Best of Breed Moderate

(Australia), and full employment with reasonable wages growth still coming through. This was in contrast to leading indicators still pointing to likely
recession in the period ahead, or significantly weaker conditions at the very least (ie. recession-like).

Economists and investors became ever more impatient with China’s economic woes as the country’s economic data continued to worsen with
slumping household and business confidence / sentiment, very high youth unemployment, a still deflating housing market bubble, concerns that
Chinese government overregulation would remain, and both foreign demand and capital flows slowing. The government continues to provide very
measured and specific stimulus, prioritising stimulus volume over size, which provides incremental stability to the economy over a longer period of
time rather than fixing any malaise with a big bazooka approach to stimulus – a play book that China has used regularly and aggressively over the last
20-30 years. However, the more current measured approach from Chinese officials has seen investors favour developed markets and other emerging
markets (e.g., India, Korea, Mexico).

We almost saw another US government shutdown as the current administration’s insatiable (and ridiculous) spending continues, racking up even
larger deficits and adding to the US$33 trillion debt pile! Basic economics teaches you to do the complete opposite when there is strong economic
growth, and you are trying to curb runaway inflation. In the absence of economic rationalism, the current administration’s approach applies significant
additional pressure on monetary policy (ie. central bank activities) and/or forces investors to react accordingly (ie. sell bonds, rising yields). Both
occurred in the quarter, with rhetoric from the Federal Reserve increasingly more hawkish, putting another rate rise on the table for this year and
dousing expectations of significant rate cuts in 2024.

From a market perspective, we saw both ups and downs for most asset classes given the changing dynamics discussed above. The A.I. / technology
sector received considerable positive attention, with surging prices for anything tagged as being “A.I.” broadening into support for technology names.
Corporate reporting season was mixed at best, with results coming in a little better than fairly weak expectations, whilst the limited guidance provided
was generally weak with rising costs and slowing demand expected in the period ahead. Those companies with very low debt levels or no debt are
clearly in enviable positions.

Oil prices surged higher in the quarter as supply was further tightened by OPEC and Russia, first temporarily and then more permanently, whilst
demand remained resilient. Conflicts in oil/gas rich regions also supported the price push higher as investors fretted over additional supply shortages,
whilst investment in new oil/gas fields remains constrained by the global push to renewable energy sources.

There was also weakness in the AUD/USD in the period as concerns regarding the Chinese economic outlook rose (negative AUD) whilst expectations
of narrower interest rate differentials between Australia and the US were dashed (positive USD) as the higher rates for longer mantra took hold.

Portfolio update
Portfolio returns for the September quarter came in below expectations, as outperformance in parts of the portfolio weren’t enough to overcome
positioning within global equities and investment selection within infrastructure which detracted from returns.

Drivers of performance on the asset allocation side included an overweight to global equities versus Australian equities as unhedged currency
exposure assisted returns given falls in the Australian dollar. Positioning within Australian and global equities detracted as our allocation to mid/small
sized companies hurt relative returns. Allocations to property and infrastructure hurt absolute returns as rising real yields and concerns regarding
longer duration assets hit home in the quarter. Positioning within bonds assisted relative returns given our aggregate lower interest rate duration
exposure, however, bonds underperformed cash as rising bond yields meant prices fell.

Drivers of performance on the investment selection side were wide and varied. Within Australian equities, Bennelong and Flinders contributed to
relative returns with both showcasing their strong stock selection skills within their respective market segments. Yarra was the clear detractor in the
mid-sized company space, giving back some of the very strong outperformance year to date. Within global equities, GQG was the clear highlight
outperforming strongly due to stock selection within energy and healthcare, whilst T. Rowe produced an admirable flat result in a quarter where
quality/growth styles came off sharply. Bell Emerging Companies and Martin Currie were clear laggards as their quality/growth biases hurt in each of
their respective markets. Within property and infrastructure, Resolution held its own whilst MFG produced a poor result negatively affected by
currency and their significant weighting to utilities. Within bonds, low and zero interest rate duration managers Franklin and Ardea were the highlight,
whilst Brandywine detracted significantly given their long duration positioning.

On an absolute basis, the best and worst performing investments were as follows:

Top 3:
1. GQG Partners Global Equity
2. Bennelong Twenty20 Australian Equities
3. Franklin Australian Absolute Return Bond
Bottom 3:

1. MFG Core Infrastructure
2. Martin Currie Emerging Markets
3. Brandywine Global Income Optimiser

Portfolio Changes
There were no changes to the portfolio in the quarter as the team continued to review portfolio positioning and investment selection.