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.
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References to the State Street Global 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, available at www.ssga.com, before deciding whether to acquire or continue to hold units in the Funds.
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Source: Bloomberg Finance, L.P., SSGA as at 31 December 2020. Past performance is not a reliable indicator of future performance. This information should not be considered a recommendation to buy or sell any security or sector shown. 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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Past performance is not a reliable indicator of future performance. This information should not be considered a recommendation to buy or sell any security or sector shown. 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.
Currency Risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. The Portfolio may, but will not necessarily, invest in currency exchange contracts or other currency-related transactions (including derivatives transactions) to reduce exposure to different currencies. These contracts may reduce or eliminate the benefit that the Portfolio may experience from favorable currency fluctuations.
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