Active Quantitative Equity (AQE)

Fund Update – January 2022



Australian stocks had one of their worst starts to the year since the Global Financial Crisis (GFC), with the S&P/ASX 300 Index down -6.5%1. The sell-off was largely driven by rising bond yields globally, as investors increased rate hike expectations with US 10-year yields climbing 27bps to 1.78% and the Australian 10-year yield following suit with a 22bp rise to 1.89%1. From a sector perspective, Energy was the top performer on the back of rising oil and gas prices. Utilities also outperformed as electricity retailers benefited from investors positioning for higher electricity prices. Tech was the worst performing sector following material decline in valuations, while Health Care, Staples and Real Estate lagged against rising real bond yields.

Attribution:

The State Street Australian Equity Fund underperformed the S&P/ASX 300 Index during January. The underperformance was largely driven by negative stock selection within Health Care (Healius and Sonic Healthcare) and our underweight position in BHP – which now constitutes about 11% of the S&P/ASX 300 Index after its unification with its UK/US counterparts. On the other hand, our lack of exposure to Tech and good stock picking within non-mining Materials (notably consumer packaging business Amcor) were key value adds.

Notable changes during the month:

During the month of January, we took a small position in Viva Energy on the back of strong Value, Quality and Sentiment signals, as demand begins to recover post Covid and valuations remain attractive. At the same time we reduced some of our smaller Staples and REIT exposures by selling out of retail liquor business Endeavour Group and Charter Hall Social Infrastructure.