Fund Update - May 2021

State Street Australian Equity Fund

The S&P/ASX 300 Index rose +2.3% in May 2021, led by gains from large caps. Financials was the best performing sector, led by CBA and Westpac. All the major banks provided trading updates in May, with lower impairments driving earnings upgrades across the sector. Consumer Discretionary and Healthcare also outperformed in May, while IT, Utilities, and Energy underperformed the most. While earnings changes were a key driver of returns, the outperformance of banks along with poor returns from Technology and Utilities is consistent with a market positioning for rising bond yields. This is despite the fact the bond yields fell slightly over the month. Equity markets appear to be reacting more to strong inflation data, although there is ongoing debate as to the duration of inflation pressures.

The State Street Australian Equity Fund underperformed its benchmark during May after fees. From a sector perspective, the underperformance was largely driven by negative stock selection within Health Care (Fisher & Paykel Healthcare and not holding CSL), an underweight position in Financials (not holding CBA and Westpac) and an overweight position in Utilities (AusNet Services). On the other hand, having no exposure to IT was a major value add.