Fund Update - December 2020

State Street Multi-Asset Builder Fund

Global equity markets were higher again in December 2020 as markets
consolidated the large gains seen in November. Overall risky assets trended higher in December, as positive news on the Covid-19 vaccine rollout, the US pandemic relief bill and the UK-EU post-Brexit trade deal outweighed the surge in Covid-19 cases and boosted investors’ optimism. 

SSGA’s Market Risk Indicator (MRI) was largely consistent with these moves finishing December 2020 in Low Risk Regime. The signal started in Low Risk Regime and moved higher, entering Normal Regime in the first half of the month. It reversed course in mid-December and started easing, switching back to Low Risk Regime and settling there until the end of the month. 

On the economic front, manufacturing continued to show sustained resilience globally, whereas services lagged given social distancing requirements. In the US, housing and personal spending registered robust gains. China continued its sustained economic recovery, led by growth in exports and manufacturing. Rising COVID-19 cases in Europe saw tighter restrictions across many countries including the UK, which imposed a shut down amid a sharp spike in cases. Looking forward, we continue to expect a strong global economic recovery as the vaccine is implemented globally, thus our outlook does remain optimistic. 

Within growth assets, local equity markets (S&P/ASX 200 Net Total Return Index) saw positive returns, and were up 1.2% for the month. Global equity markets were also positive with the US (MSCI US Net Total Return Local
 Index) up 4.1%, Europe (MSCI Europe Net Total Return Local Index) up 2.2% and Japan (MSCI Japan Net Total Return Local Index) up 3.1%. Emerging markets (MSCI EM Net Total Return Local Index) were also positive, up 7.4% over the month. In the fixed income space, Australian government bond yields were again mixed, as shorter duration bond yields were flat whilst longer duration yields moved higher over the month. Our exposures to credit with a shorter duration profile, posted marginally negative returns for the month. Across our alternatives exposures, our investments in commodities added to performance but our emerging markets bonds exposure posted negative returns with both negatively affected by a strong Australian dollar. Looking into our average positioning across the portfolio for the month of December, the Growth assets allocations have been approximately 64% for the State Street Multi-Asset Builder Fund. Our exposure preferences in December were an overweight exposure to equities but we maintained a diversified exposure to fixed income, alternatives and cash across the remainder of the portfolio. Performance wise, our diversified exposures across equities, fixed income and alternatives resulted in the portfolio delivering a positive return in December.