Active Quantitative Equity (AQE)

Fund Update – June 2022



Australian stocks sold-off sharply in June as tighter monetary and rising real yields continued to pressure valuations. The Reserve Bank of Australia (RBA) applied pressure on the already decelerating economy, raising the official interest rate by 50bps to 0.85%. The Australian 10-year bond yields moved in reaction to the tightening monetary policy, selling off 32bps to 3.66%. At the sector level, Staples was the only sector with a positive return, as investors favoured its defensive characteristics. On the other hand, Materials (Mining) was the worst performer due to weaker commodity prices, Chinese growth concerns and rising costs.


Attribution:

The State Street Australian Equity Fund outperformed the S&P/ASX 300 Index during June.1 Our defensive positioning was a key contributor towards relative performance. The portfolio benefited from significantly higher than benchmark weight to the Consumer Staples sector (Coles, Tassal and Metcash) and underweight Financials (Big 4 banks). On the other hand, negative stock selection within Health Care (underweight CSL and overweight Ansell) and Discretionary (JB Hi-Fi) detracted from relative performance.

Notable changes during the month:

During the month of June, we made some minor adjustments to the overall portfolio as part of regular rebalancing – adding to Staples and Materials (ex Miners) and selling some Health Care names. Notably, we initiated a position in chemical manufacturer Incitec Pivot on the back of improving valuation scores alongside a stable, high quality earnings profile. At the same time, we sold out of our position in Fisher & Paykel Healthcare as Sentiment has deteriorated in recent months.