In March, the Australian Growth Fund returned -9.6%, compared to the benchmark index which returned –6.9%.

Globally, share markets fell sharply on the potential broad economic consequences of the war in Iran. The primary concern for investors is the risk of disruption to the global supply of oil and gas, which has already reflected in sharply rising energy prices. This is inflationary and could weigh meaningfully on economic growth especially if the supply of fuel is disrupted for an extended period. Specific to the ASX, the Energy (+35%) and defensive Consumer Staples (+10%) and Utilities (+9%) were the best performing sectors. In contrast, Information Technology (-28%), Healthcare (-18%) and Real Estate (-17%) were the worst performing sectors.

Software company Technology One (+3%) was our best performing position for the month. There was no material new information related to the company. It bucked the trend generally of share price weakness across our information technology positions such as Wisetech (-20%), Fineos (-13%) and Xero (-10%). In part its stronger performance may reflect increased investor confidence through its investment in technology and Artificial Intelligence ("AI"), and the value it brings to its customer base (town/regional councils across Australia & NZ and Tertiary education institutions) is significant. Technology One's pricing structure (CPI-linked price increases and pricing based on population size within a council rather than on the number of users of its products within a council) also likely helps mitigate the impact from AI disruption on its business.

In contrast, Wisetech (-20%) and NextDC (-18%) were our worst performing companies in the month. In Wisetech's case, it was likely affected by ongoing negative sentiment related to the potential for AI to disrupt software businesses, coupled with the potential for the Iran war to negatively impact global trade flows (and hence impact Wisetech's logistics customer base). NextDC is growing rapidly and requires funding for the expansion of its data centres. It had sought to issue $500m in subordinated debt to support this growth. However, the market volatility related to the Iran war impacted investor demand for debt issuance. As a result, NextDC terminated the subordinated debt issue in the month. This leaves it with a modest funding shortfall that will need to be addressed through alternative debt and/or equity markets. This weighed on its share price.

The fall in the share market in the wake of the Iran war (and inflationary impacts for economies) provided us with a good opportunity to add to our positions in diversified miners BHP and Rio Tinto in March. Both stand to benefit in a moderately inflationary environment. We also reintroduced building materials company, James Hardie to our portfolio. Its share price has fallen a long way since we exited the position in April 2025. Although rising interest rates and a weaker economic backdrop is less conducive to spurring housing activity and could weigh on its profitability near-term, it is attractively priced on a long-term view and is well positioned to rebound should tensions in the Middle East ease. Although we have confidence in the long-term prospects of our software and classified advertising investments (including Atlassian, Wisetech, SEEK and CAR Group) we have reduced our exposure in aggregate to these parts of the market. This is an acknowledgement that the negative sentiment towards these companies (out of fear that artificial intelligence advancements will displace their businesses) may persist for a period of time.