Fund Update - February 2021

State Street Multi-Asset Builder Fund

Global equity markets started February 2021 brightly, recovering from the end of month jitters we saw in January, posting strong returns to start the month. In a return to the pattern of January, markets retreated towards the end of the month as they started to price in concerns surrounding increasing inflation expectations and a resulting rise in global bond yields.

SSGA’s Market Regime Indicator (MRI) was largely consistent with these moves over the month and finished February 2021 in Low Risk Regime. The signal started in Low Risk Regime and gradually moved lower during the month but spiked in the last few days of February, consistent with the sell-off in equities towards the end of the month. The signal started in Low Risk Regime and moved lower into Euphoria in early February before picking up mid-month, switching back to Low Risk Regime, where it settled for the rest of the month.

On the economic front, a drop in the number of COVID-19 cases, extended fiscal and monetary support and the manufacturing sector’s solid momentum continued to support a broad-based economic recovery across key developed markets. On the vaccine front, the United States approved Johnson & Johnson’s single-dose vaccine and Merck announced that it will partner with Johnson & Johnson to manufacture it. In China, incoming data suggested a moderation in economic recovery in February amid mobility restriction associated with a small rise 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 was up 1.5% for the month. Global equity markets were positive with the US (MSCI US Net Total Return Local Index) up 2.6%, Europe (MSCI Europe Net Total Return Local Index) up 2.4% with Japan (MSCI Japan Net Total Return Local Index) posting a strong 3.3% return. Emerging markets (MSCI EM Index Net Total Return Local Index) posted positive returns again, up 0.8% over the month. In the fixed income space, Australian government bond yields rose with longer duration yields rising rapidly over the month whilst shorter duration bond yields were up marginally as the Reserve Bank of Australia continued with the yield curve control targeting the three year yield. Our exposures to credit with a shorter duration profile, posted negative returns for the month with yields on credit rising in line with government bonds. Across our alternatives exposures, our investments in commodities added strongly to performance but our emerging markets bonds exposure posted negative returns with both negatively affected by a stronger Australian dollar.

Looking into our average positioning across the portfolio for the month of February, the Growth assets allocations have been approximately 69% for the State Street Multi-Asset Builder Fund. Our exposure preferences in February 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 marginally negative return in February.