Active Quantitative Equity (AQE)

Fund Update – May 2022



Global equities had mixed results in May, as the willingness of central banks to shift monetary policy weighed on investor sentiment. From a sector perspective, Energy was the strongest performer thanks to ongoing geopolitical conflict and EU’s ban on Russian oil imports. Financials and Utilities also outperformed.

Attribution:

The State Street Global Equity Fund outperformed the MSCI World ex Australia Index during May.1 Strong performance from low risk stocks continued to drive outperformance. During the month, the least volatile stocks in the index outperformed the most volatile stocks by ~8%2; driven by concerns about the growth cycle and the rising probability of a US recession in 2023. We are seeing all core drivers (or factors) of our model adding value in May and YTD, with Sentiment being a key contributor in May. From a country and sector perspective, good stock picking within US Healthcare and US Communication Services were key value adds. On the other hand, our underweight in US Energy was a key detractor. The dynamic currency hedging overlay added value during the month largely due to a stronger AUD (vs USD).

Notable changes during the month:

During the month, we increase our allocation to select Communication Services names as part of regular rebalancing – including game publisher Electronic Arts which have been exhibiting relatively strong company quality characteristics; including a solid balance sheet and one of the most diverse revenue bases in the industry - allowing it to generate stable revenue growth. At the same time, we have decreased some of our positions in the Consumer sectors – such as Target, mainly as a result of falling Sentiment scores.