Fund Update – May 2023
The global economy continued to be resilient to rising rates and sticky inflation. The robust services sector drove growth, but the manufacturing sector remained in contraction. The job market remained stronger, with unemployment rates at historical lows in major developed economies. Inflation continued to remain well above the central banks’ targets. The federal debt crisis dominated headlines during the month, and the US debt ceiling was finally suspended for two years following a last-minute deal.
Attribution:
The State Street Global Equity Fund underperformed the MSCI World ex Australia Index during May.1 At the factor level, stock selection was negatively impacted by performance of our Value factor, followed by Quality. From a country and sector perspective, being underweight within US Information Technology and Consumer Discretionary sector in the US were key detractors. On the other hand, being underweight in US Financials and good stock picking within Japanese Industrials were key contributors towards relative performance. Currency hedging detracted -1.1% during the month.
Notable changes during the month:
During May, 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 the Trading Companies & Distributors industry within Industrials (notably Marubeni Corporation on the back of improving Quality score) and American Pharmaceutical company Pfizer, on the back of strong Catalyst and Sentiment scores. At the same time, we reduced our exposure to select Oil & Gas Refining & Marketing companies Idemitsu Kosan Co., Ltd. and ENEOS Holdings, Inc., on the back of falling Quality scores.