Fund Update – March 2024
Australian equities rose strongly in March alongside a global equity rally. Stocks with positive momentum led the board, pushing the ASX benchmark to its most expensive valuation outside of Covid period in terms of forward PE ratio. From a sector perspective, Gold and Real Estate were the best performers – supported by investor concerns about the strength of USD, a small fall in bond yields and more supportive credit conditions in Australia. Communication Services was the only sector to end the month in red, driven mostly by negative earnings revisions in Media.
Attribution:
The State Street Australian Equity Fund underperformed the S&P/ASX 300 Index during March1. Sector wise, being overweight Communication Services (Spark NZ, Chorus and Telstra) and negative stock selection within Industrials (Mcmillan Shakespeare and Smartgroup) were key detractors. Conversely, good stock picking within Health Care (Sigma) and having a lower than benchmark exposure to Discretionary (not holding Aristocrat) were key contributors towards relative performance.
Notable changes during the month:
We implemented a small amount of turnover in March, resulting in an increase in overall exposure to Energy and Health Care - funded by a reduction in Materials. Within Energy, we increased our position in Whitehaven Coal on the back of its attractive valuations and relatively low beta profile. Within Health Care, we added a small position in Monash IVF – an attractively priced fertility services provider that is benefiting from strong sentiment scores. Market share gains for Monash IVF are likely to continue given the recent acquisition of Fertility North and the recruitment of more specialists. Within Materials, we reduced our exposure to Rio Tinto on the back of falling sentiment scores.