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Active Quantitative Equity (AQE)

Fund Update – March 2023

2 min read

Global developed market equities rose during the month of March, despite the failure of multiple US banks and rising concerns around weaker credit growth and a potential US recession. Offsetting these concerns was an expansion of the Federal Reserve balance sheet as it provided liquidity support for banks. Much of the strong market returns were concentrated in the highest risk/beta stocks, with the highest beta quintile gaining +7.9% (AUD) while the lowest beta quintile gaining +3.0% (AUD).1 From a sector perspective, Materials and Communication Services led the board, while Real Estate and Financials lagged the broader market.

Attribution:

The State Street Global Equity Fund underperformed the MSCI World ex Australia Index during March.2 The spillover effect of the banking crisis negatively impacted the performance of our Value factor, which detracted from overall stock selection. From a country and sector perspective, being underweight US Tech and negative stock selection within US Health Care were key detractors. On the other hand, being underweight US Financials, and good stock picking within US Industrials and US Staples were key contributors towards relative performance. Currency hedging detracted -0.7% during the month.

Notable changes during the month:

During March, we made minor adjustments to the overall portfolio with the aim of improving expected risk-adjusted returns. The rebalance involved slightly increasing our exposure to select names in Food Retail (notably Kroger on the back of improving Quality and Sentiment scores) and French pharmaceutical company Sanofi, as Sentiment improved thanks to encouraging results for its eczema and asthma research pipeline. At the same time, we reduced our exposure to select Miners (Glencore) and fertilizer manufacturer Yara International – driven largely by falling Sentiment scores as earnings estimates were being downgraded.