Global equity markets were generally down in August as investors took a step back after several months of strong performance. US economic strength led to rising rates and continued hawkishness from the US Federal Reserve (FED). The contraction in the euro area economic activity deepened, with purchasing managers’ index (PMI) falling to 47.0, its lowest level since November 2020.
The State Street Global Equity Fund underperformed the MSCI World ex Australia Index during August1. Our Alpha model performance was strong in August, with positive contribution from Sentiment factors followed by Value, Quality and Catalyst factors. From a country and sector perspective, poor stock selection within German Communication Services and Consumer Discretionary sectors were the key detractors. On the other hand, good stock picking within Swiss Financials and overweight US Health Care sector were key contributors towards relative performance. Currency hedging detracted -2.62 % during the month.
During August, we made minor adjustments to the overall portfolio with the aim of improving expected risk-adjusted returns. The rebalance involved slightly increasing our exposure to select names in the Packaged Foods & Meats (notably Tyson Foods on the back of increasing Catalyst and Value scores) and Fertilizers & Agricultural Chemicals company Yara International on the back of improving Catalyst score. At the same time, we reduced our exposure to select Semiconductors companies – such as Renesas Electronics (falling Catalyst and Value scores) and NXP Semiconductors (on the back of falling Quality score).