Fund Update - November 2020

State Street Multi-Asset Builder Fund

Global equity markets were sharply higher in November 2020 as multiple prospects for a safe COVID-19 vaccine appeared on the horizon and US election uncertainty subsided creating a risk-on environment.

SSGA’s Market Risk Indicator (MRI) followed these moves with the signal starting in High Risk Regime but moved significantly lower, following a steep decline in the first days of November, and continuing in a more gradual way in the second half of the month, moving into a Low Risk regime mid-month where it stayed for the rest of the month. Specifically, all three underlying factors moved sharply lower over the month with both the Implied Volatilities on Equities and Risky Debt Spread settling in Low Risk Regime, while the Implied Volatilities on Currency finished in Normal Regime. Economically, incoming data continued to show a robust recovery despite a slowdown in services amid the third wave of infections in the US and Europe. China, too, continued with its strong economic growth recovery. Although uncertainty over the US elections subsided with Joe Biden certain to become the next US president, geo-political tensions between the US and China continued to simmer. Looking forward, we continue to expect strong global economic growth with markets focusing on fundamentals post the US election and positive vaccine news, thus our outlook does remain optimistic. 

Within growth assets, local equity markets (S&P/ASX 200 Net Total Return Index) saw strong positive returns, and were up 13.2% for the month. Global equity markets were also positive with the US (MSCI US Net Total Return Local Index) up 11.5%, Europe (MSCI Europe Net Total Return Local Index)
up 13.9% and Japan (MSCI Japan Net Total Return Local index) up 12.2%. Emerging markets (MSCI EM Index Net Total Return Local Index) were also positive, up 9.2% over the month. In the fixed income space, Australian government bond yields were 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 positive returns for the month. Across our alternatives exposures, our investments in commodities added to performance but our emerging markets bonds exposure posted marginally negative returns with both negatively affected by a strong Aussie dollar.

Looking into our average positioning across the portfolio for the month of November, the Growth assets allocations have been approximately 51% for the State Street Multi-Asset Builder Fund. Our exposure preferences in November were to have 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 November.