Fund Update – December 2023
Australian equities rose in December, largely driven by valuation expansions amid stronger case for a dovish RBA in 2024. All sector rose during the month, with lower yields fueling a relief rally in Real Estate and Health Care – the top performing sectors. Utilities and Energy lagged the most but finished the month in positive territory. Over the full calendar year, Tech and Discretionary were the best performers as the US avoided the widely anticipated recession. The defensive sectors – namely Staples, Utilities and Health were the worst performers, returning low single-digit
Attribution:
The State Street Australian Equity Fund underperformed the S&P/ASX 300 Index during December. 1 Sector wise, negative stock selection in Industrials (Mcmillan Shakespeare) and Staples (Graincorp) were key detractors from relative performance. Conversely, good stock picking within Health Care (Sigma Healthcare which rallied on the back of Chemist Warehouse merger) and Energy (Viva Energy) were key contributors.
Notable changes during the month:
We implemented a small amount of turnover in December, resulting in a slight increase in overall exposure to Energy, Staples and Industrials, funded by small reductions in Real Estate. Within Energy, we increased our position in Ampol – driven by improvements in multiple measures of Sentiment. Within Staples, we increased our weight in chicken supplier Inghams on the back of strong trading results and investor sentiment. At the same time, we continued to sell down our exposure to shopping centre operator Vicinity Centres - which is looking increasingly risky due to rising debt costs, cap rates and sharply slowing quarterly sales growth and negative stock momentum.