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SPDR® SSGA Multi-Asset Real Return ETF (RLY) – Q1 2023 Commentary

During the first quarter of 2023, RLY finished up in absolute returns, with overweights to natural resource equities, commodities, global infrastructure and cash.


Driving the fund’s underperformance were overweights to core commodities and a targeted allocation to energy funded from inflation-linked bonds. Commodities have faced numerous headwinds and struggled to find a bottom. In January, metals soared on high hopes for China’s recovery, but unseasonably warm weather and Europe’s ability to store sufficient gas supplies weighed on natural gas, which dragged energy lower. In February, rising interest rate worries and a surging US dollar (up 2.7%) weighed on both energy and metals. Commodities finished on a sour note in March as the collapse of Silicon Valley Bank weighed on sentiment and increased concerns for global growth. Energy companies, which are closely aligned with commodities, followed suit as weaker energy prices weighed on the sector. Inflation-linked bonds benefited from lower nominal yields and a slight uptick in inflation expectations to finish the quarter up over 3%. On the positive side, an overweight to global infrastructure equities and the addition of gold to the portfolio in March benefited performance. The more defensive global infrastructure equities exhibited less volatility and a gain of 3.7% for the S&P Global Infrastructure Index. Strong technical indicators in our quantitative framework supported an overweight to gold in March, which proved beneficial as the precious metal saw investors flock to safe havens amid fears that a banking crisis could drag the economy into recession. A declining US dollar also supported gold prices.

Portfolio Positioning and Outlook

Fund Performance


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Since Inception
Apr 25 2012









Market Value








Bloomberg U.S. Government Inflation-Linked Bond Index








DBIQ Optimum Yield Diversified Commodity Index Excess Return








Inception date: April 25, 2012. Source: State Street Global Advisors, as of March 31, 2022.
Past performance is not a reliable indicator of future performance. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted. Performance of an index is not illustrative of any particular investment. All results are historical and assume the reinvestment of dividends and capital gains. It is not possible to invest directly in an index.
Performance returns for periods of less than one year are not annualized. Performance is shown net of fees.
Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income as applicable.
The market price used to calculate the Market Value return is the midpoint between the highest bid and the lowest offer on the exchange on which the shares of the Fund are listed for trading, as of the time that the Fund's NAV is calculated. If you trade your shares at another time, your return may differ.
Gross Expense Ratio: 0.50% Net Expense Ratio: 0.50%
The gross expense ratio is the fund’s total annual operating expenses ratio. It is gross of any fee waivers or expense reimbursements. It can be found in the fund’s most recent prospectus.

Portfolio Allocations

Portfolio Allocations Table RLY

Inflation is poised to moderate, but likely to remain above central bank targets in 2023 leading central banks to keep rates higher for longer. This, along with geopolitical stresses, will dent economic growth, but the severity is uncertain. While slowing global economic growth is a headwind for real assets, the resiliency of economies offers hope for a “soft landing.” The inflationary environment, which is shifting from a high and rising regime to a moderating, but higher for longer one, still offers support. The stabilization in the banking sector has improved risk sentiment and provides another potential tailwind for real assets.

The outlook for commodities is balanced in the near-term, but fundamentals are structurally bullish for the energy complex and precious metals appear posed to keep their shine. Global demand for oil has outpaced expectations and with inventories expected to draw in the second half of 2023, we could be facing an undersupplied market given production restraints and constraints from OPEC+ and US shale producers. Metals will benefit from a pickup in Chinese demand and play a critical role in developing clean energy, but could slump with slower growth. Gold looks attractiveto us across many fronts. From a fundamental perspective, the weaker US dollar supports the precious metal, which can provide a safe haven alternative. Further, our evaluation of technical indicators, analyzing long and shorter-term trends in prices, imply positive tailwinds.

Both global natural resource equities and infrastructure equities stand to benefit from infrastructure spending along with the longer-term trends of decarbonization and other green energy thematics. Natural resource equities remain attractively valued and stand to benefit from a resurgence in energy prices later in the year and a pickup in Chinese demand in the second half of 2023.

US REITs are well positioned for a recovery with healthy balance sheets and could find a bottom once the Federal Reserve pivots and bond yields continue to move lower. However, slower economic growth in the near-term could weigh on earnings and is likely to remain a headwind. Real rates have been range bound over the past six months. If the US Federal Reserve’s interest rate hiking cycle is near complete and market expectations for a decline by year end prove correct, a retreat in real rates will aid inflation-linked bonds.

Market Regime Forecasts

The Market Regime Indicator (MRI) employs a quantitative framework and forward-looking market indicators, including equity- and currency-implied volatility, as well as credit spreads, to identify the current market risk environment. Tracking risk appetite shifts in the market cycle helps frame tactical asset allocation and volatility targets.

A Look at the MRI

MRI Data

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