Active Quantitative Equity (AQE)

Fund Update – February 2022



Australian stocks outperformed as the global correction continued for a second month in February 2022. The outperformance of the domestic market can be largely explained by a largely positive reporting season, as well as our higher exposure to sectors like Banks and Resources, and lower exposure to Technology stocks. In bond markets, US 10-year yields increased 5bps to 1.84%1 in February, while Australian bonds rose 25bps over the month to 2.13%,1 as the market brought forward expectations of RBA rate hikes. The escalating Russian-Ukraine war saw commodity prices move strongly upward, particularly in Gold which lifted as investors repositioned into safe-haven asset classes. Brent Oil also edged higher as markets reacted to the impacts of sanctions on oil and gas exports.

Attribution:

The State Street Australian Equity Fund slightly underperformed the S&P/ASX 300 Index during February. The underperformance was largely driven by negative stock selection within Financials (not holding Westpac and NAB) and Health Care (Sonic Healthcare and Healius). On the other hand, having a higher than benchmark exposure to Staples (e.g. Coles and Graincorp) and good stock picking within Industrials (Smartgroup and Fletcher Building) were key value adds.

Notable changes during the month:

During the month of February, we increased our position in agricultural supplier Elders, on the back of strong Valuation and Sentiment signals (in particular our supply chain signals). At the same time, we reduced our Real Estate exposure in Dexus as Sentiment is starting to falter on the back of higher corporate and interest costs and demand tail risk as a result of hybrid work.