Goal-Based Portfolio Update – Quarter Ending 30 June 2026
Market Update
| July 23, 2026
Quarterly Update
After what was a difficult start to the year, the June quarter brought a very different experience. The ceasefire in the Middle East in early April, followed by the partial reopening of the Strait of Hormuz shortly after, changed the outlook rapidly. Oil prices fell, inflation expectations moderated, and equity markets recovered strongly. The S&P 500, which had been down around 7% for the year at the start of April, erased those losses within weeks and went on to reach new all-time highs. By the end of the quarter, the index was up around 9% for the year. The below summary highlights key information about the Profusion goal-based portfolios:
How the Buckets Performed
Profusion Short-Term Portfolio (2 to 5 Year Horizon)
This bucket returned 2.06% for the quarter. After the near-flat result in March, where the portfolio’s job was simply to preserve capital through a difficult period, this quarter saw credit markets normalise and every holding in the portfolio delivered a positive return. Returns ranged from 1.4% to 2.6% across our managers, reflecting the steady income generation that this bucket is designed to provide.
The RBA’s May rate increase to 4.35% was a further headwind for fixed income markets in the early part of the quarter, but the subsequent hold in June, combined with easing geopolitical pressures, allowed credit markets to stabilise. The portfolio continues to focus on shorter-dated, investment-grade credit with low sensitivity to interest rate movements. Over twelve months, the bucket has returned 3.95%, and since inception 5.43% per annum
Profusion Medium-Term Portfolio (5 to 10 Year Horizon)
This bucket returned 5.73% for the quarter. Where the March quarter demonstrated the value of diversification as a source of protection, this quarter demonstrated its value as a source of participation. Nearly every asset class contributed positively, and the combination produced a strong overall result.
International equities led the way with a return above 12%. Our property allocation returned over 9%. Our alternatives strategies were strong, with one returning above 10%. Australian equities advanced around 4%, and fixed interest was uniformly positive. The diversity of return sources that cushioned last quarter’s downturn also meant the portfolio was well positioned to capture the recovery across multiple markets. Over twelve months the bucket has returned 9.14%, and since inception 10.85% per annum.
Profusion Long-Term Portfolio (10+ Year Horizon)
This bucket returned 7.47% for the quarter. With around 90% in growth assets, the portfolio participated fully in the equity market rebound. Every equity holding was positive. The strongest contributions came from our hedged international equity positions, which captured the full extent of the global recovery without currency drag. Our growth-oriented managers that were hardest hit last quarter, Baillie Gifford and C Worldwide among them, bounced back with returns in the 7% range. Our value managers also contributed strongly.
This is the other side of the coin from last quarter. In March, we noted that the portfolio’s growth-heavy allocation means it will feel market declines acutely. This quarter demonstrates the counterpart: it will also participate fully in recoveries. For a portfolio with a ten-year horizon, both sides of that experience are expected and accounted for. Over twelve months the model has returned 9.18%, and since inception 14.34% per annum.
Profusion High Growth Portfolio (10-Year Horizon with Maximum Growth Focus)
This bucket returned 9.93% for the quarter, unsurprisingly the strongest result across the portfolio suite. With 100% in growth assets, the portfolio captured the full force of the equity market recovery. Our global small companies manager delivered an outstanding 25.2% return for the quarter. Hedged international equity index positions and the geared equity strategy also delivered strong double-digit results. Australian equities contributed solidly. The one detractor was our China allocation, which declined around 10%.
Last quarter we noted that drawdowns of this magnitude are part of the deal with a high growth portfolio. This quarter illustrates the other part of that deal. The portfolio is now up 14.49% over one year and 12.42% per annum since inception.
Key Highlights
Short-Term Portfolio: Adapting to a New Rate Environment
The contrast between the March and June quarters illustrates how this bucket is designed to behave. In March, amid rising rates and geopolitical disruption, the portfolio preserved capital. In June, as conditions normalised, it generated solid positive returns. Both outcomes are consistent with the portfolio’s mandate. We don’t expect dramatic moves from this bucket in either direction. We expect it to protect capital when conditions are tough and generate steady income when conditions are more favourable. Over the first half of the year, that is exactly what it did.
Medium-Term Portfolio: Benefits of Diversification
In March, we highlighted how genuinely different asset classes provided protection when equities fell. This quarter, those same asset classes participated in the recovery. Infrastructure, property, equities, alternatives, and fixed interest all contributed positively. This is the full picture of what diversification delivers over time: not just downside protection, but the ability to capture returns from wherever they emerge. Profusion’s asset-allocation-driven approach is designed to ensure the portfolio benefits from multiple sources of return through varying market conditions, and the first half of 2026 has been a clear illustration of that design working as intended.
Long-Term Portfolio: Recovery and Rebalancing
The portfolio’s strong recovery this quarter reflects the benefit of maintaining full equity exposure through the March sell-off, and of the modest increase in risk we added late last quarter. Those additions, funded by reducing fixed interest, were made at lower prices and have contributed to the recovery.
High Growth Portfolio: Staying the Course
The High Growth portfolio’s 9.93% result is exactly what a 100% growth asset portfolio should deliver in a strong recovery quarter. The geared equity position we added to at the end of March contributed meaningfully. For the second consecutive quarter, Ironbark Apis Global Small Companies was the standout. Its 25.2% return reflects both stock-specific outcomes and the broader theme of smaller companies outperforming.
Outlook
The Ceasefire Environment
The ceasefire in the Middle East and the partial reopening of the Strait of Hormuz removed the most acute source of market stress from Q1. Oil prices have retreated from their peaks, and the immediate inflation shock has begun to moderate. However, the situation remains fluid, and a resumption of hostilities would reintroduce the same pressures that destabilised markets earlier in the year. We don’t position portfolios around predictions of geopolitical outcomes, but we do aim to ensure that each bucket can withstand a range of scenarios.
Interest Rates: On Hold For Now
The RBA held rates at 4.35% in June after three consecutive increases. The accompanying commentary suggested the Board sees monetary policy as sufficiently restrictive to bring inflation back toward target over time. Whether further hikes are required will depend on how inflation, the labour market, and global conditions evolve. For our Short-Term bucket, this environment of elevated but potentially stable rates supports the portfolio’s income-generating capacity. For our growth-oriented buckets, the key question is whether rate stability allows equity market gains to consolidate.
Equity Markets: Recovery and Valuations
The speed of the Q2 recovery has been remarkable, but it means equity markets are no longer pricing in the same level of uncertainty that prevailed in March. Valuations in some segments have returned to elevated levels. The broadening of market leadership, with smaller companies and international markets participating more actively, is a positive development for diversified portfolios like ours. But we remain alert to the risk that the recovery outruns the improvement in fundamentals.
Your Portfolios Are Built for This
The first half of 2026 has been an eventful period. A strong start, a sharp sell-off, and a rapid recovery, all within six months. Through it all, your bucket structure has worked as designed. The Short-Term bucket preserved capital when it needed to and generated income when conditions allowed. The Medium-Term bucket’s diversification both cushioned the downside and captured the recovery. The Long-Term and High Growth buckets felt the full weight of the sell-off and participated fully in the rebound. This is not a portfolio structure that tries to avoid all volatility. It is one that ensures volatility is matched to the right timeframe, so that short-term disruptions don’t compromise long-term objectives. That remains our focus.
Portfolio Actions and Commitment
During the June quarter, we made changes across several portfolios. In the Short-Term model, we added an allocation to the Barings Liquidity Investment Strategy. In the Medium-Term model, we added JPMorgan Global Bond and Macquarie Australian Fixed Interest to broaden our fixed interest exposure. In the Long-Term model, we removed Airlie Australian Share Fund, consolidating our positioning in the index and small caps.
Principled Guidance
Our focus remains on the principles that guide your portfolio construction:
Your bucket structure continues to serve its purpose. We’ll continue monitoring developments closely and will act when opportunities arise that align with our investment philosophy.
Each bucket serves its designated timeframe.
The first half of 2026 has been a clear demonstration of this principle in action.
Asset allocation drives returns.
The diversity of return sources across your portfolios drove both protection in March and participation in June.
We take only the risks we need to. The modest increase in risk we made in the Long-Term and High Growth models at the end of March, taking advantage of the sell-off, has contributed to the recovery. The SMA structure gives us the flexibility to respond to market conditions when opportunities arise.
Costs matter.
We continue to blend low-cost passive exposure with selective active management where we see genuine potential for value addition.
Valuations matter.
We maintain patience to own things at sensible prices. With markets having recovered strongly, we remain disciplined about where we deploy capital.
