Avoiding the big four banks has been a positive contributor to performance of the State Street Australian Equity fund.
In its latest commentary, head of portfolio management- Australia active quantitative equities Bruce Apted said the outperformance of the State Street Australian Equity fund could be attributed to a having a lower weight than the benchmark to financials.
It currently held just 1.3% to financials compared to 26.3% held by the its ASX 300 index benchmark and there were no financials in the fund’s top 10 largest holdings.
Instead, its largest sector weighting was to healthcare at 19.2% versus 12% held by the benchmark.
“From a sector perspective, good stockpicking within healthcare (not holding CSL) was offset by negative stock selection within utilities (AusNet Services and AGL Energy) and the higher than benchmark exposure to staples.
“Calendar year to date the fund outperformed its benchmark after fees. The fund’s outperformance can be largely attributed to our lower than benchmark weight in financials (not holding big four banks) and higher than benchmark weight in gold,” Apted commented.
According to FE Analytics, since the start of 2020 to 31 May, 2020, the State Street Australian Equity fund lost 10.2% versus losses by the ASX 300 of 12.6%. Within the Australian Core Strategies universe, the Australian equity sector lost 11.5% over the same period.
Apted said the fund was looking to avoid those sectors in the index which were most expensive and at risk of a slowdown in growth expectations. These were energy, industrials, information technology and consumer discretionary.
“We see a wide range of valuations for different companies and look to avoid the more expensive parts of the ASX 300 index. We continue to hold no exposure to the information technology space, only a small exposure to select industrials and a small exposure to energy,” he said.
Performance of State Street Australian Equity fund versus ASX 300 and Australian equity sector since start of 2020 to 31 May 2020
