Active Quantitative Equity (AQE)

Fund Update – April 2022



April was a weak month for global equities, as rising inflation fears fueled concerns of a slowdown in economic growth. The S&P 500 Index fell 8.7% (local) and the NASDAQ fell 13.2% (local)1, as equity valuations were hit by rising real yields and concerns around central bank tightening into a slowing cycle. Defensive sector performed relatively better, led by Staples and Utilities. Energy also fell less than the market as commodity prices remained elevated. On the other hand, Communication Services, Discretionary and IT were the worst performing sectors.

Attribution:

The State Street Global Equity Fund outperformed the MSCI World ex Australia Index during April (net).2 Low risk / low beta stocks performed strongly in a falling market, and rising interest rates continue to provide tail wind to the performance of cheaper / value names. From a country and sector perspective, being overweight defensive sectors added value. Stock picking was strongest within US Discretionary (which we are underweight), US Health Care (overweight) and having a lower than benchmark exposure to US Tech. At the other end of the spectrum, having no exposure to US Energy and negative stock selection within US Financials were key detractors. The dynamic currency hedging overlay detracted value in April largely due to a strengthening USD (vs AUD).

Notable changes during the month:

During the month, we increase our allocation to select Consumer Staples and Material names as part of regular rebalancing – including Tyson Foods and Newmont Corp which have been exhibiting relatively strong expected return and diversification characteristics. At the same time, we have marginally decreased some of our overweight positions in Health Care – including Merck and AbbVie.