The Fund’s portfolio delivered a grossed-up income return of 0.50% during the month and 8.05% over the past 12 months, compared with the Benchmark’s grossed-up income returns of 0.88% and 4.78%, respectively.

March was a turbulent month in equity markets as the escalating conflict in the Middle East triggered a sharp re-pricing of risk assets. US and Israeli military strikes on Iran led to the disruption of approximately 20% of global daily oil supply, sending Brent Crude oil surging toward US$120 per barrel. Energy was the standout sector globally and domestically, with the ASX 200 Energy Index reaching a two-year high. Financials, Technology and Consumer Discretionary all declined materially as higher rates and growth concerns weighed on valuations.

Within the Fund, standout contributors included Woodside Energy Group (Woodside), Santos, Ampol and Viva Energy Group (Viva). Woodside and Santos both rallied strongly in early March as Brent and Middle Eastern crude benchmarks surged on Strait of Hormuz supply fears. Both companies benefit from rising oil prices through long-term liquefied natural gas (LNG) contracts indexed to crude, and from the separate surge in spot LNG prices as Hormuz disruptions tightened supply. As the month progressed, the Fund reduced its exposure to both names and rotated the proceeds into domestic refiners, which can still benefit whether the Strait is open or closed.

Ampol was the stronger performer as its Lytton refinery in Brisbane is a direct beneficiary of elevated refiner margins. The proposed acquisition of EG Australia would extend its network further. Viva also benefited from widening refining margins at its Geelong refinery, which entered the year with major maintenance complete, and the new Ultra Low Sulphur Gasoline plant commissioned. An additional catalyst was the Federal Government’s March recalibration of the Fuel Security Services Payment, which broadened its support window and reduced earnings downside risk at Geelong. We view both Ampol and Viva as structural beneficiaries of Australia’s reliance on domestic refining capacity.

Cash levels in the Fund increased as mining exposure was reduced, given the threat of fuel shortages in Australia. The weighting to National Australia Bank (NAB) was also reduced (increasing cash) due to small to medium-sized enterprise and agriculture risks.

Looking ahead, the duration and resolution of the Middle East conflict remain the key variables for markets. A prolonged disruption would sustain elevated energy prices and continue to support domestic refining and energy equities, while compressing margins across energy-intensive industries and weighing on consumer sentiment. In this environment, the Fund’s focus on income-generating, undervalued businesses with strong fundamentals provides a degree of natural resilience. We continue to monitor portfolio exposures carefully, with particular attention to the economic impact of higher energy costs.