Active Quantitative Equity (AQE)

Fund Update – March 2022



March was a strong month for equities as markets rose on news of peace talks between Russia and Ukraine. Global investors largely remain positive on the economic outlook of developed nations despite high inflation and approaching rate hikes, as geopolitical tensions continue to keep investors wary of emerging markets. Strengthening rate hike outlooks saw yield curves flattening and long dated bonds sell-off, with the US 10-year yields rising to 2.4% at month end.1 At the sector level, strong oil and commodity prices supported the Energy and Materials sectors, while Utilities was also amongst the top performers. On the other hand, Financials and Staples lagged the broader market.


Attribution:

The State Street Global Equity Fund outperformed the MSCI World ex Australia Index during March. Much of the outperformance can be attributed towards our overweight in high alpha (expected returns) and low beta cohort of stocks. From a country and sector perspective, good stock picking within defensive sectors like US Health Care and US Staples added the most value. At the other end of the spectrum, negative stock selection within US IT and US Discretionary were key detractors. The dynamic currency hedging overlay added value in March largely due to a strengthening AUD (vs USD).

Notable changes during the month:

During the month, we increased our allocation to select Food Retail names as part of regular rebalancing – including Kroger and Loblaw 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 Diversified Chemicals and Semiconductors on the back of falling Sentiment and increasing risk scores.