Active Quantitative Equity (AQE)

Fund Update –July 2022



Global equities rebounded in July, driven by a positive US reporting season and GDP contraction which softened investor expectations of the pace of future rate hikes. The improvement in investor sentiment was also seen in bond markets, as US bond yields dropped 33bps to 2.64% and long-term inflation expectations remained well anchored. From a sector perspective, Consumer Discretionary, IT & Industrials were relative outperformers while Communication Services and Health Care lagged the broader market.

Attribution:

The State Street Global Equity Fund underperformed the MSCI World ex Australia Index during July.1 From a model perspective, quality factors remained positive but sentiment, value and low risk factors were largely unrewarded as investors pivoted towards cyclical growth stocks. From a country and sector perspective, being underweight US Tech, US Discretionary and US Health Care were key detractors. On the other hand, being underweight Hong Kong Financials, UK Health Care and good stock picking in German Health Care were key contributors towards relative performance. The dynamic currency hedging overlay added 0.9% during the month largely due to a stronger AUD (vs USD).

Notable changes during the month:

During the month, we marginally increased our allocation to select Utilities and Energy names as part of regular rebalancing – including DTE and Consolidated Edison. At the same time, we have decreased some of our positions in the Industrials and Health Care – such as building product company Johnson Controls and logistics company Deutsche Post, mainly as a result of falling Sentiment scores.