Active Quantitative Equity (AQE)

Fund Update – February 2022



Global markets struggled in February 2022, as geopolitical tensions saw investors reposition for an uncertain outlook. The MSCI World ex AU Index fell -5.5% in AUD terms, largely driven by the S&P 500 Index which dropped -3.0% (local)1. The key macro event was the outbreak of war in the Ukraine, as this was a trigger for investors to reduce risk in an environment where growth was already slowing. The Russia-Ukraine war put additional pressure on European equities with European stocks underperforming its global peers through February. In addition, commodity prices moved strongly upward, particularly in Gold which lifted as investors repositioned into safe-haven asset classes. Brent Oil also edged higher as markets reacted to the impacts of sanctions on oil and gas exports. At the sector level, all sectors ended the month in red aside from Energy – which benefited from the geopolitical turmoil.


Attribution:

The State Street Global Equity Fund outperformed the MSCI World ex Australia Index during February, providing downside participation of 53%. In addition to the tailwind from our low volatility positioning, exposures to attractively valued stocks provided further boost to the outperformance of the portfolio. From a country and sector perspective, good stock picking within defensive sectors like US Health Care, US Communication Services and US Staples added the most value. At the other end of the spectrum, negative stock selection within US Industrials and US Discretionary were key detractors. The dynamic currency hedging overlay added value in February largely due to a weakening USD (vs. AUD).

Notable changes during the month:

During the month, we increase our allocation to select Consumer Staples names as part of regular rebalancing – including a Tyson Foods and a new position in Hershey Co which have been exhibiting relatively strong expected (risk-adjusted) return expectations. At the same time, we have marginally decreased some of our overweight positions in Industrials via Deutsche Post, AP Moller and Johnson Controls International on the back of falling Sentiment scores.