Active Quantitative Equity (AQE)

Fund Update – March 2022



Australian stocks outperformed their global counterparts for the second month in a row in March 2022, driven by strong gains in Resources and Financials. Australian equities have been strong performers since Russia’s invasion of Ukraine which drove a rotation to markets with high commodity exposure and strong governance. In bond markets, strengthening rate hike outlooks saw significant bond sell-offs – with Australian 10-year yields up 69bps to 2.83%1. On a sector basis, IT was the strongest performer as investors bought some of the companies that had corrected more in January and February. Energy and Materials also outperformed on the back of strong commodity prices. On the other hand, REITs, Health Care and Consumer Discretionary sectors underperformed.

Attribution:

The State Street Australian Equity Fund underperformed the S&P/ASX 300 Index during March. The underperformance was largely driven by negative stock selection in Metals & Mining (Sandfire Resources and underweight BHP) and Financials (not holding CBA and NAB). On the other hand, good stock picking within Staples (Wesfarmers and Aristocrat Leisure) and Energy (New Hope Corp) were key value adds.

Notable changes during the month:

During the month of March, we increased our position in BHP – thanks to the positive impact of strong commodity prices and improvements in multiple Sentiment measures – including price action, hedge fund positioning and analyst forecasts. At the same time, we reduced our Consumer Discretionary exposure in Wesfarmers as Sentiment and Catalyst signals began to falter on the back of negative price momentum, elevated operating expenditure and management’s apparent reticence to pass on inflation.