Active Quantitative Equity (AQE)

Fund Update – May 2022



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.

Attribution:

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.

Notable changes during the month:

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.