Fund Update - June 2021

State Street Global Equity Fund

Global equities rose +4.7% in AUD terms in June 2021. At the mid-point of the year, global vaccination rates continued to climb, and reflation and rotation (from growth to value) has been well under way. However, the Fed’s hawkish turn mid-June appears to have put a break on recent trends – with a sharp rotation in sector leadership caused by a flattening yield curve and a stall in the Value rally. While this may appear alarming to some, we expect this rotation to be largely fleeting in nature. Ongoing economic recovery, yield curve action, valuations and company fundamentals will be key drivers of returns going forward; we see that as supportive for the value stocks in 2H2021.

The State Street Global Equity Fund underperformed the broader index (MSCI World ex Australia TR Index) in June. The underperformance was largely driven by our lower than benchmark weight in US tech (including communication services), our overweight to US Staples, as well as negative stock selection in US Health Care. On the other hand, good stock picking within Japanese and US Industrials were key contributors towards relative performance. Currency hedging detracted 1.2% from returns during the
month as the AUD depreciated 3% against the USD to $0.75.