Australian stocks declined in May on the back of RBA’s first rate hike since 2010. The initiation of a new tightening cycle was met with a broad market sell-off, and all sectors ended the month in red. Materials performed relatively better with easing COVID restrictions and expectations of more stimulus in China supporting major mining stocks. On the other hand, Real Estate was the worst performing sector with GMG falling after Amazon announced its plans to sublease warehouse space. Rising interest rates were also a headwind for real estate overall.
The State Street Australian Equity Fund underperformed the S&P/ASX 300 Index during May.1 Our benchmark relative sector allocation was a key drag on relative performance. Being overweight the Consumer Staples sector (Metcash and Coles) and underweight Miners (notably BHP) were key detractors during the month. In addition, negative stock selection (not holding the big 4 banks) within Financials further detracted. On the other hand, good stock picking within Materials (Amcor) and Energy (New Hope) contributed towards relative performance.
During the month of May, we made some minor adjustments to the overall portfolio as part of regular rebalancing – selling some Financials and buying some Industrial names. Notably, we reduced our position in fund manager Janus Henderson as expected return fell and initiated a position in rail freight operator Aurizon. Aurizon is a strong defensive stock that not only exhibits stellar measures across all of our core alpha drivers, but is also expected to be more resilient in the face of further rises in interest rates.
1Source: SSGA as of 31 May 2022. Past performance is not a reliable indicator of future performance. Performance returns for periods of less than one year are not annualized. The performance figures contained herein reflect Total Returns and are provided on a net of fees basis. Performance figures are calculated using end-of-month exit prices and assume the reinvestment of distributions and make no allowance for tax. Net performance figures are after management and transaction costs. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income as applicable.
Issued by State Street Global Advisors, Australia Services Limited (AFSL Number 274900, ABN 16 108 671 441) (“SSGA, ASL”). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia · Telephone: +612 9240-7600 · Web: www.ssga.com. State Street Global Advisors, Australia, Limited (AFSL Number 238276, ABN 42 003 914 225) (“SSGA Australia”) is the Investment Manager.
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References to the State Street Australian Equity Fund ("the Fund") in this communication are references to the managed investment schemes domiciled in Australia, promoted by SSGA Australia, in respect of which SSGA, ASL is the Responsible Entity. This general information has been prepared without taking into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure document and target market determination, available at www.ssga.com, before deciding whether to acquire or continue to hold units in the Funds.
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This information should not be considered a recommendation to buy or sell any security or sector shown. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. It is not known whether the securities or sectors shown will be profitable in the future. Characteristics are as of the date indicated, subject to change, and should not be relied upon as current thereafter.
Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
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