Quarterly fund commentary State Street Australian Equity Fund
Market Commentary
Global economic activity strengthened during the third quarter, supported by resilient services activity and continued expansion in manufacturing. Labor market conditions remained generally resilient, although hiring activity and wage growth moderated across some economies. Higher energy and input costs contributed to renewed inflationary pressures. Against this backdrop, monetary policy remained restrictive, with the Fed and ECB both raising interest rates during the quarter.
Risk assets delivered mixed performance during the third quarter. Resilient economic growth, strong corporate earnings, and continued investment in AI-related infrastructure supported equities, while rising U.S. Treasury yields and higher energy prices weighed on market sentiment. Developed markets (DM) outperformed emerging markets (EM), while value outperformed growth. Fixed income posted negative returns during the quarter. U.S. Treasury yields rose sharply, with the 2-year Treasury recording its largest quarterly increase since Q2 2023, while the 10-year and 30-year Treasury yields reached their highest levels since 2002. Commodities advanced strongly, led by energy, while the U.S. Dollar Index gained modestly.
While central banks across the region remain data dependent, the RBA is biased toward additional tightening as inflation remains elevated and fuel costs continue to pose upside risks.
Fund Update
The State Street Australian Equity Fund returned 0.82% (net of fees) for the three months to 30 September 2026, compared with 1.26% for the S&P/ASX 300 Index.
Australian shares delivered modest gains during the quarter, although performance varied significantly across sectors. Defensive areas of the market performed strongly, with Health Care (+25.4%) and Energy (+17.3%) leading returns. In contrast, more growth-oriented sectors such as Information Technology (-9.4%), Consumer Discretionary (-9.3%) lagged.
The Fund's performance relative to the benchmark was mixed. Sector positioning contributed positively overall, although stock selection within some sectors detracted from returns. Selection within Health Care and Industrials were the main areas of weakness, while stock selection in Communication Services and Financials partially offset these impacts.
The Fund has maintained its defensive characteristics, delivering lower volatility than the broader market, supported by its focus on quality companies with resilient earnings. Over the past three years, the Fund has delivered annualised volatility of 7.8%, compared with 10.6% for the S&P/ASX 300 Index. The portfolio has also been less sensitive to market movements, with a three-year beta of 0.63.
Q3-2026: Top 5 and Bottom 5 Contributors
Top 5 Contributors | Sector | Active Weight (%) | Total Return (%) | Total Effect (%) |
Ansell Limited | Health Care | 2.26 | 44.65 | 0.85 |
Commonwealth Bank of Australia | Financials | -9.88 | -6.73 | 0.78 |
Wesfarmers Limited | Consumer Discretionary | -3.42 | -13.94 | 0.56 |
Woodside Energy Group Ltd | Energy | 3.28 | 15.80 | 0.42 |
Goodman Group | Real Estate | -2.10 | -12.69 | 0.32 |
Bottom 5 Contributors | Sector | Active Weight (%) | Total Return (%) | Total Effect (%) |
CSL Limited | Health Care | -2.58 | 62.65 | -1.22 |
Downer EDI Limited | Industrials | 2.97 | -13.10 | -0.47 |
Regis Healthcare Ltd. | Health Care | 1.11 | -32.24 | -0.42 |
Chorus Limited | Communication Services | 1.91 | -13.58 | -0.33 |
Aurizon Holdings Ltd. | Industrials | 3.11 | -8.70 | -0.33 |
Source: State Street Investment Management as of 30 September 2026. Excludes cash, cash equivalents and accruals. The securities included in the Fund and their weightings can change at any time. This information should not be considered a recommendation to invest in a particular sector or to buy or sell any security shown. It is not known whether the sectors or securities shown will be profitable in the future. The holdings are taken from the accounting records of State Street Investment Management which may differ from the official books and records of the custodian. Past performance is not a reliable indicator or future performance
12 Month Commentary
The State Street Australian Equity Fund returned -0.37% (net of fees) for the 12 months to 30 September 2026, compared with 2.39% for the S&P/ASX 300 Index.
Over the year, Australian equities were supported by strong performance from cyclical sectors. Energy (+34.2%) and Industrials (+31.5%) were the strongest performers, while Information Technology (-40.9%) and Consumer Discretionary (-19.4%) recorded the weakest returns.
Relative performance was primarily impacted by sector positioning. Underweight exposure to Materials and overweight positions in Health Care and Communication Services weighed on returns, as Materials outperformed the broader market while Health Care and Communication Services underperformed. Stock selection was mixed overall, with strong selection effects within Health Care and Communication Services offset by weak selection in Materials and Consumer Staples.
Australian equities have lagged global peers in recent years. We remain cautious given:
- Relatively weaker earnings prospects, with the ASX 300 having comparatively high exposure to the banking and housing sectors.
- Ongoing geopolitical uncertainty, which continues to weigh on energy prices.• Lingering inflation risks, which could keep interest rates higher for longer.
Against this backdrop, we believe defensive investment strategies remain attractive, particularly if market volatility increases. The Fund remains focused on high-quality businesses with strong cash generation, resilient earnings and sustainable long-term growth prospects, while retaining the flexibility to participate if market leadership broadens across sectors.
12 Months to Sep-2026: Top 5, bottom 5 relative contributors:
Top 5 Contributors | Sector | Active Weight (%) | Total Return (%) | Total Effect (%) |
Commonwealth Bank of Australia | Financials | -10.04 | -6.78 | 0.92 |
Rio Tinto Limited | Materials | 1.42 | 42.21 | 0.79 |
Ansell Limited | Health Care | 2.33 | 45.79 | 0.75 |
Ventia Services Group Limited | Industrials | 3.19 | 25.04 | 0.73 |
Aurizon Holdings Ltd. | Industrials | 3.26 | 23.29 | 0.68 |
Bottom 5 Contributors | Sector | Active Weight (%) | Total Return (%) | Total Effect (%) |
BHP Group Ltd | Materials | -7.13 | 45.19 | -2.63 |
Graincorp Limited Class A | Consumer Staples | 1.43 | -39.98 | -1.16 |
Perenti Limited | Materials | 1.48 | -24.36 | -0.88 |
EBOS Group Limited | Health Care | 1.60 | -35.46 | -0.75 |
Brambles Limited | Industrials | 2.07 | -22.55 | -0.72 |
Source: State Street Investment Management as of 30 September 2026. Excludes cash, cash equivalents and accruals. The securities included in the Fund and their weightings can change at any time. This information should not be considered a recommendation to invest in a particular sector or to buy or sell any security shown. It is not known whether the sectors or securities shown will be profitable in the future. The holdings are taken from the accounting records of State Street Investment Management which may differ from the official books and records of the custodian. Past performance is not a reliable indicator or future performance.
Notable Changes during the Quarter
During the quarter, the main sectoral changes were net purchases in Materials and Energy, funded by sales across Industrials and Real Estate.
Within Materials, new positions were established in BlueScope Steel and MacMahon Holdings, reflecting strong return expectations.
Within Industrials, Brambles and Worley were the most notable sales. The existing position in Worley was trimmed, while Brambles was progressively reduced before being fully exited in September. Both positions were reduced in response to declining alpha signals.
At the stock level, Brambles, ResMed and Whitehaven Coal were the largest sales, as our quantitative investment process continued to assess the relative attractiveness of opportunities across the investment universe. BlueScope Steel and Ampol were the largest purchases, supported by strong sentiment scores and higher overall expected returns.
Our positioning remains focused on companies with lower economic sensitivity and more sustainable long-term earnings. Against an uncertain market backdrop, the Fund continues to emphasise capital preservation while investing in companies with strong long-term fundamentals and the resilience to navigate periods of heightened market volatility.