Active Quantitative Equity (AQE)

Fund Update – August 2022



Australian stocks rose in August, with the S&P/ASX 300 Index up 1.2%. Energy and Materials drove much of the rise at the index level, which was interesting given Brent fell 13.5% in August. Real Estate, Staples and Utilities ended the month in the red. Soft guidance was a contributor to REIT’s underperformance which was below expectations (often due to higher expected interest costs). While reporting season saw better than expected overall June half year results, we are also seeing downgrades to FY23 forecasts – particularly within Resources.

Attribution:

The State Street Australian Equity Fund underperformed the S&P/ASX 300 Index during August.1 The portfolio’s preference for lower risk, defensive names (in Staples, REITs and Health Care) was a major detractor as energy and resources drove much of the index performance. Sector wise, negative stock selection within Metals & Mining ex Gold (underweight BHP and OZ Minerals) and our overweight to Staples (Coles) were key detractors from relative performance. On the other hand, our underweight to Financials (AUB Group, not holding CBA) and good stock picking within Communication Services (Spark NZ and Telstra) were key contributors.

Notable changes during the month:

During the month of August, we made some minor trades as part of regular rebalancing of the portfolio. We increased our position in Incitec Pivot and Chorus on the back of improving Sentiment and alpha scores in recent months. Purchases were partly funded by selling out of select names across the portfolio (like Tassal and New Hope Corp) with the objective of improving overall portfolio risk/return characteristics.