Fund Update – December 2020

State Street Global Equity Fund

Global markets were slightly down in AUD terms in December 2020. From a sector perspective, Utilities and Real Estate fell the most while IT and Discretionary was marginally positive. The rotation into Value stocks that began in November took a breather in December, although the intensifying ‘blue wave’ in the US is setting the scene for further rotation into cyclicals and value. 

The State Street Global Equity Fund outperformed the broader index in December. From a sector perspective, positive contributions from Industrials and Utilities were more than offset by negative stock selection within Staples and Discretionary. Currency hedging gained +2.3% as the AUD rose 3.5c to $0.77 on higher commodity prices and risk-on sentiment. Over the past 2 years, underperformance has been driven by investor’s preference for “growth at any price”; and detractors came largely from two cohorts – the very expensive (where we are underweight) and the very cheap (where we are overweight). Having a lower risk bias also hurt performance, as investors tried to front run the ‘re-opening trade’ post COVID-19 sell-off and post vaccine announcement. The strategy aims to minimize total portfolio volatility and as part of achieving that objective we have avoided the riskier, most expensive, high sentiment segments of the market that harbor higher valuation risks.