September, 2023
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/advanceinternationalsharesmulti-blendfund-wholesaleunits.pdfAugust, 2023
In August, equities lost momentum and weakened (in local currency terms) after a strong rally over recent months. On a relative basis, US equities outperformed most major developed and emerging markets, while growth stocks generally outperformed value. Fixed income returns were broadly flat to slightly negative. The real asset sector saw the largest declines, with global REITs and infrastructure down markedly.
A combination of weaker forward-looking indicators, a modest uptick in inflation data, particularly in the US, and Fitch Ratings’ downgrade of its US credit rating at the start of August, impacted returns.
Composite purchasing manager indices (PMI) continue to soften across the globe with the US Composite PMI falling to a six-month low in August. A similar scenario for the Eurozone, China, UK and Australia, however, Japan bucked the trend with a marginally higher reading. Consumer confidence continues to weaken with increasing signs of consumer distress, such as rising credit card and auto-loan delinquencies. After a period of strength, global labour markets appear to be cooling off. US employment data saw a distinct weakening in August with a solid uptick in its unemployment rate (+0.3% to 3.8%).
Headline inflation dropped sharply in the Eurozone and UK, largely driven by base effects as the 2022 inflationary spike rolls off. Elsewhere, inflation ticked up slightly in the US as a bounce in energy prices fed into its CPI numbers, however, CPI data was broadly unchanged in Japan and China.
At the annual summit in Jackson Hole, Wyoming, central bankers expressed cautious optimism, while acknowledging inflationary expectations remain elevated. Federal Reserve Chairman, Jerome Powell, reiterated the Fed’s goal of bringing inflation down to its 2% target and is prepared to lift rates further if required. The Bank of England raised interest rates for the 14th consecutive month with its policy rate now sitting at 5.25%. On the flipside, the People’s Bank of China introduced a number of easing measures, cutting its key interest rate (1yr Loan Prime Rate) to a record low of 3.45%.
In terms of August returns, Hedged Developed Markets Overseas Shares declined -1.9% and Unhedged Emerging Markets Equities dropped -2.4%. Hedged Overseas Government Bonds delivered a narrow loss of -0.3% over the month as government bond yields experienced an uptick in most major regions. Using 10 year government bonds as a guide, US yields saw a jump of 16bps, both Japan and UK were up 6bps, however, there were slight declines for German and Australian 10 year yields.
Australian Shares returned -0.8% in August, outperforming hedged overseas counterparts. Key contributing sectors were Consumer Discretionary (5.8%) and Real Estate (2.2%), whereas Materials (-2.0%) and Consumer Staples (-3.1%) detracted.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/FP102-Advance-International-Shares-Multi-Blend-Fund-Wholesale-Units-Aug-2023.pdfJuly, 2023
In July, global equity markets maintained current upward momentum with most regions delivering solid, positive returns. On the other hand, fixed income performance was mixed, although in this “risk on” phase of the cycle, riskier parts of the sector fared better.
A combination of further declines in headline inflation, resilient economic data, particularly from the US, and market expectations that the current interest rate hiking cycle is nearing an end, led to positive investor sentiment throughout the month.
The advanced Q2 2023 US GDP growth figure was reported late month, coming in at 2.4% and surprising market economist estimates of 1.8%. On the flipside, UK and Eurozone growth was close to flat. Benefitting from the base effects of emerging from its extensive 2022 Covid lockdown, China’s GDP growth rate was measured at an annualised 6.3%, though a little below 7.3% expectations. Forwardlooking composite purchasing manager indices (PMI) kept falling across the globe in July, with Japan the only region holding steady. PMIs for the services sector continue to outpace manufacturing though are easing towards 50, an important level that is considered the line between expansion and contraction.
Inflation data continued to decline, somewhat aided by the impact of last year’s energy price surge rolling off. US headline Consumer Price Index (CPI) fell to 3.0% p.a and is at the lowest level since early 2021. Similarly, CPI data across the UK, Eurozone and Australia, continues to show easing inflationary conditions, albeit at higher levels than the US. CPI has flatlined at near zero in China. Japan was the only major country that recorded a marginal increase in its inflation rate during Q2 2023. Central banks continued to err on the side of caution, increasing rates by 25bps in the US and Eurozone and 50bps in the UK, where inflation remains the highest among major developed economies.
Central banks continued to emphasise a data-driven approach to future rate adjustments. In the US, which is furthest ahead in the inflation cycle, markets are now pricing in a greater than 50% chance that the Fed’s policy rate has peaked and interest rate cuts maybe forthcoming in 2024.
Over July, Hedged Developed Markets Overseas Shares delivered a 2.8% return. US indices were broadly in line with international developed markets, however, Emerging Markets (unhedged) outperformed with a positive 4.9% return. Value modestly outperformed growth over the period, although when looking on a yearto-date basis, mega-cap tech stocks still dominate returns and has led to increased market concentration within that segment of global markets. In the US, with roughly half of S&P500 companies having reported their Q2 2023 earnings, FactSet currently projects a 7% quarter over quarter (QoQ) earnings decline, which would be the softest quarterly outcome since the height of Covid’s impact. That said, to date the majority of companies have reported better than expected earnings results.
Hedged Overseas Government Bonds returned -0.4% over the month, as bond yields across most regions increased in July. Yields on both key long bonds in the US (10-year and 30-year) rose by approximately 15bps over the month. Outside the US, Japan’s 10-year yield rose by around 19bps, which is noteworthy following the Bank of Japan’s announcement that it will further increase the upper tolerance range for the 10-year yield (now 1.0% vs 0.5% previously). The UK was the only major economy where the 10-year yield fell, albeit modestly.
Australian Shares returned 2.9%, marginally outperforming their overseas counterparts in July. Financials (4.9%) and Energy (8.4%) were the strongest sectors of the market, while Healthcare (-1.5%), and Materials (1.4%) detracted.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/FP503-Advance-International-Shares-Multi-Blend-Fund-Retail-Units-Jul-2023.pdfJune, 2023
The broad MSCI World ex-Australia Accumulation Index returned 5.8% in hedged terms and 3.1% in unhedged terms over the month as the AUD appreciated against the USD and most major developed market currencies. The best performing sectors were Consumer Discretionary (7.4%) and Industrials (6.0%), while the weakest performing sectors were Utilities (-0.3%) and Consumer Staples (- 0.1%). In AUD terms, the MSCI Small Caps Total Return Index was up by 3.4%, while the MSCI Emerging Markets Accumulation Index was up by 0.9% over June.
Over the month, the S&P500 Composite Index (6.6%), the NASDAQ (6.6%) and the Dow Jones Industrial Average (4.7%) increased, all in USD terms. In local currency terms, for the major European share markets the DAX 30 (Germany) (3.1%), the CAC 40 (France) (4.5%) and the FTSE 100 (UK) (1.4%) were all ahead. In Asia, Hong Kong’s Hang Seng (4.5%), the Japanese TOPIX (7.5%) and the Indian S&P BSE 500 (4.1%) increased, while the Chinese SSE Composite (-0.1%) decreased, all in local currency terms.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/FP102-Advance-International-Shares-Multi-Blend-Fund-Wholesale-Units-Jun-2023.pdfMay, 2023
The broad MSCI World ex Australia Accumulation Index returned -0.2% in hedged terms and 1.2% in unhedged terms over the month as the AUD depreciated against the USD and GBP. In AUD terms, the strongest performing sectors were IT (10.5%) and Communication Services (5.8%), while Energy (-8.4%) and Materials (-5.2%) were the weakest performers. In AUD terms, the MSCI Small Caps Total Return Index was down by 0.7%, while the MSCI Emerging Markets Accumulation Index was up by 0.4% over May.
Over the month, the S&P500 Composite Index (0.4%) and the NASDAQ (5.8%) increased, while the Dow Jones Industrial Average declined (-3.2%), all in USD terms. In local currency terms, for the major European share markets the DAX 30 (Germany) (-1.6%), the CAC 40 (France) (-3.9%) and the FTSE 100 (UK) (-4.9%) all decreased.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/FP102-Advance-International-Shares-Multi-Blend-Fund-Wholesale-Units-May-2023.pdfApril, 2023
In April, risk asset returns in developed markets were mostly positive, while defensive assets also provided modest gains. Emerging market equities were lower than their developed market counterparts due to the weakness in Chinese stocks
News flow during April was fairly quiet until the last week of the month when banking concerns resurfaced, as First Republic Bank came under pressure and was ultimately acquired by J.P. Morgan. Equity market volatility ended the month at its lowest level since late-2021, despite a brief spike during the last week of the month. Major economies remained resilient, driven largely by service activity. US GDP for Q1 2023 rose at a 1.1% annualised rate, which was below expectations. Consumer confidence remained on the rise and labour markets remained tight, in spite of high profile layoffs in the US.
Headline inflation continued to decline in major economies, reaching 5.0% in the US, its lowest level since mid-2021. In the UK, inflation fell by less than expected and remained above 10.0%, the highest rate in major developed economies. The People’s Bank of China and Reserve Bank of Australia left key lending rates unchanged.
Over April, Hedged Developed Markets Overseas Shares returned 1.6%. Even though the US earnings season delivered a fair number of positive EPS surprises relative to expectations, the earnings decline over the first quarter is set to be the largest since the second quarter of 2020. Returns were positive for most sectors with Consumer Staples delivering the largest gains for the month. Value outperformed growth among large- and mid-cap stocks, while growth outperformed among small-caps. Emerging Market Shares (UH) underperformed unhedged Overseas Shares in April.
Weakness in China outweighed the better performance from India and Brazil.
Hedged Overseas Government Bonds returned 0.2% over the month as bond yields generally saw modest changes for most countries during the month. In the US, the 10-year bond yield fell by 4bps, while the 30-year yield was flat. In developed markets outside the US, 10-year yields rose by 6bps for Japan and 23bps for the UK. US inflation expectations, as measured by the 10-year inflation breakeven rate, fell from 2.3% to 2.2%. Australian Government Bonds were flat over the month.
Lending conditions remain somewhat stressed due to banking concerns but bond markets have remained fairly calm. Credit spreads generally declined during the month, with investment-grade spreads falling 2bps and high yield spreads declining 3bps.
Australian Shares returned 1.8%, underperforming their overseas counterparts in April. Real Estate (5.2%) and IT (4.5%) were the strongest sectors, meanwhile Materials (-2.6%) and Utilities (1.4%) were the largest detractors.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/FP102-Advance-International-Shares-Multi-Blend-Fund-Apr-2023.pdfMarch, 2023
The Advance International Multi-Blend Fund returned 3.05 % in March, underperforming the MSCI World ex-Australia Index by 0.84%. Global equities were positive in March, despite uncertainty in the Banking sector as institutions including Silicon Valley Bank and Credit Suisse faced bank runs, necessitating intervention from prudential regulators to prevent contagion. Financials sold off on poor sentiment in the sector while Real Estate was weak as investors exited on expectations of increased funding costs and lower operating incomes in a tighter credit environment. Conversely, large cap technology names proved resilient as they exhibited quality characteristics stemming from their strong balance sheets and limited leverage.
Against this background, GuardCap was the top contributor to relative performance. GuardCap is a high conviction strategy aimed at building a portfolio that has double digit long-term growth in earnings and cash flows with a strong balance sheet. The manager’s quality characteristics proved defensive in a weak month for global equities, with a further tailwind from the fund’s zero-weight to the Financials and Real Estate sectors. Conversely, Wellington Global Opportunistic Value was the largest detractor from performance. The strategy invests in companies that have been sharply discounted by the market due to investor bias in dealing with uncertainty. Negative stock selection in Financials including an overweight to Insurers detracted from relative performance over the month.
From a country perspective, the funds overweight to Denmark was the top contributor to relative performance, while negative stock selection in the United States was the top detractor from relative performance. On a sector level, strong stock selection in Health Care was the top contributor to relative performance, whereas an underweight to Information Technology was the largest detractor. The fund’s overweight to MarketAxess Holdings. was the top driver of relative performance whereas the underweight to Apple was the largest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-22.pdfFebruary, 2023
The Advance Australian Fixed Interest Multi Blend Fund outperformed its benchmark in February with our underlying managers delivering a positive relative result over the month.
Pendal delivered positive excess returns in February. The domestic duration component of the fund was a positive contributor. The physical portfolio outperformed the benchmark. The government sector positioning performed inline whilst the non-government portion of the portfolio performed well.
Financials, supra-nationals, infrastructure, and real estate sector positioning also added to performance.
Janus Henderson outperformed the benchmark over the month with value added through active management in both rates and credit. Overweight duration to swap rates over government bonds yields has been a positive contributor. Active allocations to Tier 2 debt was a strong driver of returns as these assets significantly outperformed.
Macquarie also delivered a positive excess in February, driven by sector rotation, security selection as well as duration and curve. The Portfolio’s overweight credit positioning contributed positively to performance as Australian credit spreads outperformed global peers.
A combination of a hawkish shift by central banks and stronger-than-expected data in the US resulted in higher rates across the curve. This dampened risk sentiment in February.
In the United States, the Federal Reserve raised the Fed Funds rate by a further 25 basis points to 4.75%. In their accompanying statement the Committee stated that ongoing increases will be appropriate and that whilst inflation has eased somewhat it remained elevated. In the ensuing press conference Fed Chair Jay Powell noted that financial conditions had tightened ‘very significantly’ in the past year and that they are talking about a couple more rate hikes.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-Australian-Fixed-Interest-Multi-Blend-Fund-factsheet-1.pdfJanuary, 2023
The Advance International Equities Multi-Blend Fund returned 2.94% in January, marginally underperforming the MSCI World ex-Australia Index by 0.03%. Global equities rallied in January as disinflationary economic signals led to optimism that a peak in the Federal Reserve Target Rate was approaching. Benchmark performance was driven by large cap US technology names, which continued to rebound from lows reached in 2022.
Against this background, T. Rowe Price was the top contributor to relative performance. The strategy seeks out companies with prospects for accelerating returns on capital. Strong stock selection particularly in US Information Technology names was a key driver of outperformance. Conversely, Wellington Durable Enterprises was the largest detractor from relative performance. The fund aims to invest in stable businesses with the potential to deliver market returns at less risk than the market. Weaker than consensus earnings from high conviction Diversified Financials names detracted from relative performance over the month.
From a country perspective, strong stock selection in the US was the top contributor to relative performance, while weak stock selection in France and the fund’s overweight to Denmark were the top detractors. On a sector level, strong stock selection in Industrials was the top contributor to relative performance, whereas weaker stock selection in Consumer Discretionary was the largest detractor. The fund’s overweight to MarketAxess was the top driver of relative performance whereas the underweight to Tesla was the heaviest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-21.pdfDecember, 2022
The Advance International Equities Multi-Blend Fund declined 3.87% in December, outperforming the MSCI World ex-Australia Index by 1.62%. Global equities sold off in December as recession fears and expectations of earnings downgrades weighed on investor sentiment. A persistently hawkish tone from the US Federal Reserve Chair Powell compounded these concerns over the month.
Against this background, Wellington Global Opportunistic Value was the top contributor to relative performance. The strategy invests in companies that have sold off due to increased uncertainty. Strong stock selection in the US consumer discretionary sector drove outperformance over the month. Conversely, Ardevora was the largest detractor from performance. The manager applies a framework based on cognitive psychology to identify risky management behaviour and errors made by investors and analysts. Negative stock selection, particularly in financials and industrials detracted over the month.
From a country perspective, strong stock selection in the United States was the top contributor to relative performance, while the fund’s overweight to Korea was the top detractor from relative performance. On a sector level, effective stock selection in consumer discretionary names was the top contributor to relative performance, whereas the overweight to utilities was the largest detractor. The fund’s underweight to Tesla was the top driver of relative performance whereas the overweight to the London Stock Exchange Group was the heaviest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-20.pdfNovember, 2022
The Advance International Equities Multi-Blend Fund returned 2.76% in November, outperforming the MSCI World ex-Australia Index by 0.74%. Equities continued to rise in November with sentiment improving following the release of the US CPI below expectations. Further, third quarter earnings continued to prove resilient.
Against this background, Wellington Global Opportunistic Value was the top contributor to relative performance. The strategy invests in companies that have sold off due to increased uncertainty. The manager’s overweight to China contributed positively as equities rebounded on expectations of an exit from the country’s Covid-zero policy. Conversely, Wellington Global Quality Growth was the largest detractor from the aggregate’s performance. The manager invests in companies with quality growth characteristics defined as high organic revenue growth rates and high and improving cash flow margins. Negative stock selection in IT and Financials names detracted over the month, with additional headwinds from the strategy’s growth style exposure.
From a country perspective, the overweight to China was the top contributor to relative performance, while exposure to Brazil was the top detractor from relative performance. On a sector level, effective stock selection in Consumer Discretionary names was the top contributor to relative performance, whereas weaker stock selection in Financials was the largest detractor. The fund’s underweight to Apple was the top driver of alpha over the month whereas the underweight to NVIDIA was the heaviest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-19.pdfOctober, 2022
The Advance International Equities Multi-Blend Fund returned 7.09% in October, underperforming the MSCI World ex-Australia Index by 0.72%. Global Equities rallied in October as investors started to question the Fed’s “higher for longer” mantra. These questions emerged as both supply chain constraints and demand showed early signs of easing. Further, third quarter earnings continued to prove resilient, with Energy companies surprising strongly to the upside.
Against this background, Realindex was the top contributor to relative performance. The manager builds a portfolio based on accounting measures representative of fundamental value, independent of the benchmark. Strong stock selection in US Consumer Discretionary names proved a key driver over the month. The fund’s Value tilt provided an additional tailwind as the factor meaningfully outperformed in October. Conversely, T. Rowe Price was the largest detractor from performance. The manager seeks out companies where the team has an insight on improving business fundamentals and prospects for accelerating returns on capital. The fund continued to face headwinds from the Growth factor which trailed the broader index in October. The fund’s contrarian exposure to China also detracted over the month.
From a country perspective, effective stock selection in the United States was the top contributor to relative performance, while the fund’s exposure to China was the top detractor from relative performance. On a sector level, strong stock selection in Health Care names was the top contributor to relative performance, while negative stock selection in Consumer Staples was the largest detractor. From a stock perspective, the fund’s underweight to Tesla was the top driver of relative performance whereas the overweight to Yum China Holdings was the heaviest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-18.pdfSeptember, 2022
The Advance International Equities Multi-Blend Fund returned -2.92% in September, outperforming the MSCI World ex-Australia Index by 0.31%. Global Equities sold off in September as the economic outlook continued to deteriorate. Ongoing tightening from global central banks and concerns around Europe’s energy security contributed to weakening sentiment. This was further compounded late in the month by a diminished outlook for the United Kingdom, as the government announced expansionary fiscal policy that conflicted with the Bank of England’s monetary tightening.
Against this volatile backdrop, Wellington Durable Enterprises was the top contributor to relative performance. The fund invests in stable companies with earnings that are resilient to the business cycle. Strong stock selection drove outperformance over the month, with the fund’s high conviction names in Financials being particularly well rewarded. Conversely, T. Rowe Price was the largest detractor from performance. T. Rowe seeks out companies where the team has an insight on stable to improving business fundamentals and prospects for accelerating returns on capital. The fund’s allocation to China drove underperformance in September, with an added headwind from the fund’s exposure to long duration growth companies which also underperformed over the month.
From a country perspective, effective stock selection in Denmark was the top contributor to outperformance, while the overweight to China was the top detractor. On a sector level, strong stock selection in Financials was the top contributor to relative performance, while weaker stock selection in Health Care was the largest detractor. The overweight to Charles Schwab was the top driver of relative performance while the underweight to Johnson & Johnson was the largest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-17.pdfAugust, 2022
The Advance International Equities Multi-Blend Fund declined -2.07% in August, outperforming the MSCI World ex-Australia Index by 0.47%. Global equities sold off in August, driven by hawkish remarks from the US Federal Reserve Chairman, Jerome Powell, at the Board’s Jackson Hole symposium. Chair Powell indicated that monetary conditions would need to remain tighter for longer to bring inflation under control. This led to a reversal in global equities, which until this point had rallied over the month.
Against this background, Realindex was the top contributor to relative performance. Realindex build a portfolio based on accounting measures representative of fundamental value, independent of the market benchmark. The strategy outperformed in August, driven by the fund’s overweight to Financials and effective stock selection in the Consumer Discretionary sector. Meaningful outperformance of the Value factor provided a further tailwind over the month. Conversely, GuardCap was the largest detractor. GuardCap is a high conviction strategy aimed at building a portfolio of companies with double digit long-term growth in earnings and cash flows with strong balance sheets. Negative stock selection in Bioscience and Pharmaceutical names detracted from relative performance in August.
From a country perspective, the fund’s overweight to China was the top contributor to relative performance, while negative stock selection in the United Kingdom was the largest detractor from relative performance. On a sector level, strong stock selection in Financials was the top contributor to relative performance, whereas negative stock selection in Consumer Staples was the largest detractor. The overweight to Daiichi Sankyo was the top driver of relative performance while the overweight to Mastercard was the heaviest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-16.pdfJuly, 2022
The Advance International Equities Multi-Blend Fund returned 4.89% in July, underperforming the MSCI World ex-Australia Index by 1.51%. Global equities rose strongly in July, as many markets rebounded from deep losses made over the last few months amid signs that inflationary pressures were easing, and corporate earnings might not be as bad as feared. Growth led market performance over the month, following comments from the Fed alluding to a reduction in the pace of rate hikes.
Against this background, T. Rowe Price was the top contributor to relative performance. The strategy invests in companies with potential for accelerating returns on capital. This leads to growth bias in the fund, which was rewarded as growth meaningfully outperformed value over the month. Conversely, Wellington Global Opportunistic Value was the largest detractor. The fund invests in companies that have been sharply discounted by the market due to investor bias in dealing with uncertainty. In addition to the style headwind from value’s underperformance, stock selection detracted over the month.
From a country perspective, strong stock selection in the United Kingdom was the top contributor to relative performance, while the fund’s underweight exposure to the US and negative stock selection within the country, was the top detractor. On a sector level, effective stock selection in Health Care was the top contributor to relative performance, whereas negative stock selection in Consumer Discretionary was the largest detractor. From a stock perspective, the underweight to Johnson & Johnson was the top driver of relative performance whereas the underweight to Apple was the largest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-15.pdfJune, 2022
The Advance International Shares Multi-Blend Fund declined 4.06% in June outperforming the MSCI World ex-Australia Index by 58 basis points. Global equities continued to sell off in June, as concerns around a central bank-induced recession continued to drive market sentiment lower. The peak inflation narrative dissipated over the month, as May US CPI at 8.6% once again set a multi-decade high, leaving investors unconvinced that policy makers can engineer a ‘soft landing.’
Against this background, GuardCap was the top contributor to relative performance. GuardCap uses a high conviction strategy aimed at building a portfolio that has double digit long-term growth in earnings and cash flows with a strong balance sheet. This leads to a bias towards quality and growth factors, both of which outperformed over the month. Conversely, Ardevora was the largest detractor from relative performance. Ardevora applies a framework based on cognitive psychology to identify risky management behaviour and errors made by investors and analysts. Negative stock selection, particularly in Health Care and Materials weighed on performance over the month.
From a country perspective, the overweight to China was the top contributor to relative performance, while negative stock selection in the United States was the top detractor. On a sector level, strong stock selection in Financials was the top contributor to relative performance, whereas negative stock selection in Industrials was the largest detractor. The overweight to CME Group was the top driver of relative performance while the overweight to Booking Holdings was the largest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-1-2.pdfMay, 2022
The Advance International Equities Multi-Blend Fund declined 1.26% in May, underperforming the MSCI World ex-Australia Index by 0.43%. Global equities proved volatile in May as investors weighed persistent upside earnings surprises against negative forward guidance issued by companies. Lingering riskoff sentiment led to continued outperformance of defensive and value names over the month, further driven by a 50 basis points increase in rates from the US Federal Reserve.
Against this background, Realindex was the top contributor to relative performance. Realindex build a portfolio based on accounting measures representative of fundamental value, independent of the benchmark. Outperformance was driven by the market rewarding value characteristics inherent in the fund. Conversely, GuardCap was the largest detractor from the aggregate’s performance. GuardCap is a high conviction strategy aimed at building a portfolio that has double digit long-term growth in earnings and cash flows with a strong balance sheet. This leads to a bias toward quality and growth factors, both of which detracted over the month.
From a country perspective, the fund’s overweight to China was the top contributor to relative performance, while the fund’s overweight exposure to Denmark was the top detractor from relative performance. On a sector level, effective stock selection in Information Technology was the top contributor to relative performance, whereas the fund’s underweight to Energy was the largest detractor. The aggregate fund’s underweight to Apple Inc. was the top driver of relative performance whereas the overweight to CME Group was the heaviest detractor
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-14.pdfApril, 2022
The Advance International Equities Multi-Blend Fund returned -1.66% in April, outperforming the MSCI World ex-Australia Index by 1.51%. Equities faced renewed pressure in April as investors reduced exposure to risky assets in the face of rising yields. Defensive and Value names were beneficiaries over the month, with tightening financial conditions forcing a flight to safety as investors considered the potential for an impending recession.
Against this background, Wellington Global Opportunistic Value was the top contributor to relative performance. The strategy invests in companies that have been discounted by the market due to investor bias in dealing with uncertainty. The performance in April was aided by the market rewarding companies with value characteristics. Conversely, T. Rowe Price was the largest detractor from the aggregate fund’s performance, with negative stock selection in Financials driving underperformance over the month.
From a country perspective the fund’s underweight to, and stock selection in, the United States was the top contributor to relative performance, while the fund’s exposure to Brazil was the largest detractor from relative performance. On a sector level effective stock selection in Information Technology was the top contributor to relative performance, while the underweight to Energy was the largest detractor. The aggregate fund’s zero-weight to NVIDIA Corporation was the top driver of relative performance while the overweight to Charles Schwab was the heaviest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-13.pdfFebruary, 2022
The Advance International Equities Multi-Blend Fund detracted by 4.64% in February, although outperformed the MSCI World ex-Australia Index by 0.88%. Concerns about rising inflation and subsequent interest rate rises dominated markets early in the month and drove relative sector and style performance. Towards the end of the month, Russia’s invasion of Ukraine sent shockwaves through markets. While Russia and Ukraine contribute little revenue exposure to the index, risks come from rising energy and commodity prices and the flow on impact for interest rates.
Against this background, Wellington Global Opportunistic Value was the top contributor to relative performance. The strategy aims to find opportunities in out-of-favour companies. Relative performance in February was driven by effective stock selection within Communication Services. Conversely, Wellington Global Quality Growth was the largest detractor. The strategy was negatively impacted by the continued rotation away from growth, with stock selection in Information Technology the largest detractor.
North America was the top contributor to relative performance of the Advance International Shares fund on a regional level, while the fund’s exposure to the United Kingdom was the largest detractor. From a sector perspective, positive stock selection in Financials was the fund’s top contributor to outperformance while the underweight to Energy detracted the most, against a backdrop of rising prices and supply uncertainty. The portfolio’s underweight to Meta was the top driver of relative performance whereas the position in Sberbank was the largest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-12.pdfJanuary, 2022
The Advance International Equities Multi-Blend Fund returned -2.82% in January, underperforming the MSCI World ex-Australia Index by 0.62%. Global equities declined as the market digested the high December inflation numbers and hawkish Fed commentary. The subsequent rise in real yields led to Energy and Financials as the only sectors to deliver positive returns. Against this background, Wellington Global Opportunistic Value was the top contributor to relative performance. The manager’s approach of investing in companies trading at discounted valuations was rewarded in January, as the portfolio became a beneficiary of the rate-induced flight away from expensive companies. Ardevora was the largest detractor partly due to a structural underweight to Energy and Financials and weak stock selection in Information Technology.
Hong Kong was the top contributor to relative performance on a country level, while the fund’s exposure to United States detracted most significantly. From a sector perspective, stock selection in the Consumer Discretionary sector was the top contributor to relative performance while the underweight to Energy names was the largest detractor. The portfolio’s underweight to NVIDIA Corporation was the top driver of relative performance whereas the underweight to Apple was the largest detractor
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-11.pdfDecember, 2021
The Advance International Shares Fund returned 2.17% in December, outperforming the MSCI World ex-Australia Index by 0.50%. The market gained as early indications suggested the Omicron variant caused less severe disease. Markets were also driven by monetary policy concerns, with the Federal Reserve making a hawkish pivot in response to increased inflation. The market responded with a sell-off in Growth names in favour of Value. Against this background, Wellington Global Opportunistic Value and GuardCap were the top contributors to outperformance in December.
Effective stock selection, particularly in the United States, proved to be the primary driver of relative performance of both funds. T. Rowe Price’s Global Focussed Growth strategy was the largest detractor over the month. The manager is focussed on finding companies with accelerating returns on capital. The flight from Growth names weighed on relative performance. Negative stock selection in IT and Industrials also impacted the strategy’s returns. From a country perspective, positive stock selection in the US was the largest contributor to relative performance of the aggregate fund, while the fund’s exposure to China was the top detractor over the month. The aggregate fund’s underweight to Information Technology, and effective stock selection within the sector were the top contributors to performance, whereas the fund’s stock selection within Consumer Staples as well as the underweight to the sector detracted most heavily from relative performance. The aggregate’s underweight to NVIDIA was the top contributor to performance on a security level, while an underweight to Apple proved to be the largest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-10.pdfNovember, 2021
The Advance International Shares Fund returned 1.93% in November, underperforming the MSCI World ex-Australia Index in AUD by 1.77%. The benchmark
advanced in early November, once again led by a concentrated group of technology stocks. As the month progressed, the focus turned to inflation, with US CPI reaching 6.2% YoY to October, the highest figure in over 30 years. This prompted fears of less accommodative monetary policy, with expectations that the Fed may taper more aggressively and wind down asset purchases sooner than expected. In the closing days of November, a new variant of Covid emerged, weighing on sentiment in equity markets.
Managers largely underperformed the benchmark over the month. Wellington Global Quality Growth was the top contributor to relative performance, with strong stock selection in Communication Services, Financials and Utilities driving performance. Wellington Global Opportunistic Value was the largest detractor from the aggregate portfolio partly due to the fund’s underweight to mega cap growth names that contributed over a third of the benchmark’s returns in November.
From a country perspective, stock selection in Germany was the largest contributor to aggregate portfolio performance whereas negative stock selection in the US was the largest detractor. The aggregate fund’s underweight to Energy was the largest sector contributor to relative performance whereas the underweight to Information Technology was the key detractor. The fund’s underweight to PayPal Holdings was the largest individual contributor to relative performance whereas the underweight to Apple was the largest detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-9.pdfOctober, 2021
The Advance International Shares Fund returned 0.40% in October, underperforming the MSCI World ex-Australia Index in AUD by -1.25%. Global equities gained in October, bolstered by strong corporate earnings, and easing concerns around China’s property sector. Inflation has increased across developed markets, placing a focus on central banks for indications of tightening monetary policy.
Guardcap was the largest contributor to relative performance, as the quality bias helped given investor concerns around inflation and interest rate rises. Wellington Global Opportunistic Value was the largest detractor over the month, with underperformance driven by poor stock selection within the IT sector. On a country level, positive stock selection in Japan was the largest contributor to relative performance, with negative stock selection and an underweight to the US being the largest detractor. Positive stock selection within the Healthcare sector was the top contributor to relative performance, with negative stock selection and underweight to IT being the largest detractor on a sector level. On a stock level, an overweight to UnitedHealth Group was the most significant driver of performance over the month, whereas a zero-weight position in Tesla was the largest detractor
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-8.pdfSeptember, 2021
The Advance International Shares Fund returned -2.71% in September, outperforming the MSCI World ex-Australia Index in AUD by 0.34%. The fall in global equities was driven by several headwinds including concerns around a disorderly collapse of Evergrande, inflation, and the nearing deadline to raise the US debt ceiling. US 10-year rates rose from 1.3% to 1.5%, prompting a sell-off in high growth and high valuation names.
Wellington Global Opportunistic Value was the top contributor to relative performance. The manager’s value orientation benefitted from the rotation out of Growth and into Value over the month. The underweight to the US and IT sector were also contributing factors. Guardcap’s focus on long-term quality growth was faced with style headwinds over the period and was the largest detractor from relative performance.
From a country perspective, the underweight to, and positive stock selection in the US was the largest positive contributor, whereas negative stock selection in the UK was the largest detractor. At the sector level, the underweight to and positive stock selection in IT was the largest contributor. The underweight to Energy was the largest detractor. From a stock perspective, the underweight to Apple was the top contributor, while the underweight to Tesla was the lead detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-7.pdfAugust, 2021
The Advance International Shares Fund returned 2.37% in August, underperforming the MSCI World ex-Australia Index in AUD by 0.73%. Despite the rising spread of the Delta variant, global equities delivered strong returns over the month as central banks remain supportive.
T Rowe Price was the top contributor to relative performance. The strategy is focused on finding companies with improving business fundamentals and prospects for accelerating returns on capital over a 12 to 24-month time horizon. Strong stock selection within fast growing financials (Charles Schwab and HDFC) and Communication services helped drive outperformance. Wellington Durable Enterprises was the top detractor. The strategy invests in businesses that tend to be more stable than the market appreciates. They are often small to mid-capitalisation companies in unfashionable or volatile sectors. The strategy typically underperforms in strongly trending markets particularly those driven by mega-cap stocks
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-6.pdfJuly, 2021
The Advance International Shares Fund returned 2.77% in July, underperforming the MSCI World ex-Australia Index in AUD by 1.26%. The US 10 Year yield continued to fall and was a major driver of sector and style performance. Quality and Growth styles outperformed, while Value struggled. Sector-wise, Technology and Healthcare led index returns, while Energy and Financials underperformed.
Manager performance was mostly negative. Wellington Global Quality Growth was the leading contributor to relative performance. The strategy invests in companies that have distinct growth and quality characteristics defined as high organic revenue growth rates, and high and improving cash flow margins. It was helped this month by Quality and Growth factors outperforming along with having minimal exposure to smaller cap companies. River and Mercantile was the key detractor from relative performance. The strategy has high cyclical exposure, along with a high active weight to mid and small caps. Given the rotation away from value and outperformance of growth, underperformance was expected.
From a country perspective, stock selection in Germany was the largest positive contributor, whereas the underweight and negative stock selection in the US was the largest detractor. At the sector level, positive stock selection in Industrials was the largest positive contributor. The underweight to, and negative stock selection in, IT was the largest detractor. From a stock perspective, the underweight to Amazon was the top contributor, while the underweight to Apple was the lead detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-5.pdfMay, 2021
The Advance International Shares Fund returned 1.55% (net) in May, outperforming the MSCI World ex-Australia Index in AUD by 0.36%. Rising inflation expectations have helped support shorter-duration inflation beneficiaries like commodities and value stocks, while mega cap growth stocks sold off. Manager performance was mostly positive. Realindex, a quantitative manager who build portfolios based on accounting measures representative of fundamental value, was the largest contributor. Following a weak April, the market rotation back to cyclical value and Europe’s outperformance drove strong relative returns. T Rowe Price was the largest detractor from relative performance due to weaker stock selection in Healthcare and Consumer Discretionary.
From a country perspective, the underweight and positive stock selection in the US was the largest contributor, whereas negative stock selection in France was the largest detractor. At the sector level the underweight to, and positive stock selection in IT was the largest positive contributor. The underweight to, and negative stock selection in Consumer Staples was the most significant detractor. From a stock perspective the underweight to Apple and Amazon were significant contributors, while the overweight to Trainline Plc was the lead detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-4.pdfFebruary, 2021
The Advance International Shares Fund returned 3.68% (net) in February, outperforming the MSCI World ex-Australia Index (the index) in AUD by 2.04%. The index was up 1.64% in AUD terms. February was another month of strong performance for global equities, with ongoing fiscal and monetary stimulus, while vaccination rates increase worldwide. Later in the month there was a spike in volatility due to surging bond yields prompted by inflationary concerns. At the underlying fund manager level, the results were mainly positive. T. Rowe Price was the largest positive contributor to relative performance benefiting from successfully rotating the portfolio to companies that will outperform post-covid such as Southwest Airlines. On the other side, Ardevora was the largest detractor due to the portfolio’s structural underweight to Financials, which although helped over 2020, impacted relative performance over February as the sector outperformed.
From a regional perspective, results were all positive. Positive stock selection in Developed Markets was the most significant contributor to relative returns. This was driven by strong stock selection in the United States. In terms of the overall sector view, the largest positive contributor was from an underweight to and positive stock selection in Information Technology. The largest detractor was an underweight to Energy. At a stock level, the largest positive contributors were the underweight to Apple and overweight to Charles Schwab Corporation, while the largest detractors were underweight holdings in Alphabet and Exxon.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-3.pdfJanuary, 2021
The Advance International Shares Fund returned -0.47% (net) in January, underperforming the MSCI World ex-Australia Index (The Index) in AUD by 0.03%. The index was down -0.45% in AUD terms. Following a strong start to the month, investor sentiment pulled back after concerns regarding delays in vaccination rollouts and spreads of COVID variants. At the end of the month, there was a spike in volatility caused by a retail-led short squeeze across markets.
At the underlying fund manager level, the results were mixed. River and Mercantile was the largest positive contributor to relative performance as its overweight position in cyclical names and a mid to small bias helped drive relative returns. On the other side, Wellington Composite was the largest detractor where the underlying concentrated Wellington Durable Enterprises strategy experienced large one month moves in several positions. From a regional perspective, results were mixed. The overweight to Emerging Markets added to relative returns, given the MSCI Emerging Markets Index in AUD rose 3.66% over the month. Within this, the overweight to Emerging Asia was the largest positive contributor to relative returns. On the other side, negative stock selection within North America detracted the most from relative returns. In terms of the overall sector view, the largest positive contributor was from an underweight to and positive stock selection in Consumer Staples. The largest detractor was poor stock selection in Industrials. At a stock level, the largest positive contributors were the underweights to Visa and overweight to Penumbra, while the largest detractors were underweights to Microsoft and Tesla.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-2.pdfDecember, 2020
The Advance International Shares Fund returned 8.70% over the December quarter, outperforming the MSCI World ex-Australia Index (The Index) in AUD by 3.02%.
Performance from the underlying managers was broadly positive, as managers with a higher focus on cyclical recovery outperformed, while other managers successfully rotated their portfolio to benefit from the sharp rotation against momentum and towards value. The strongest performer and contributor to relative performance was T. Rowe Price whose position in financials held the portfolio in good stead. On the other side, AQR was the only detractor as the quantitative process can underperform at market inflection points. A key contributor from a country perspective was positive stock selection in the United States. From a sector perspective the strongest contribution came from positive stock selection in Information Technology, followed by positive stock selection in Financials. At an individual stock level, the overweight holdings in Charles Schwab as well as the underweight holding in Microsoft were the largest contributors to performance. From a country perspective, the only detractor over the quarter was an ex-benchmark position in Cyprus. At an aggregate sector level, no active sector positions detracted from relative performance. At an individual stock level, the overweight to Alibaba and underweight to Tesla were the largest detractors.
In the December quarter the MSCI World ex-Australia (Net Dividends) Index rose 5.68 % in AUD terms. The Australian dollar rose 7.43% against the US Dollar over the quarter and hence this detracted from unhedged returns. Global equities began the quarter with negative performance amid soaring COVID-19 cases throughout the United States and Europe as well as uncertainty of future fiscal support and the US election. However, after the election and with positive vaccine news equity markets rallied hard in November. Pfizer, AstraZeneca and Moderna announced Vaccine candidates throughout November which led to a wave of optimism and a rotation into shares that had been most impacted by Covid-19 (Financials, Energy, Travel and Leisure stocks). Further evidence of a ‘risk on’ quarter was the MSCI Emerging Markets Index returning 11.18% in AUD terms. The market is pricing in continued earnings growth and a broad economic recovery returning global GDP levels to their previous peak sometime in late 2021. However, risks remain to this narrative including geopolitical tension, policy mistakes and a resurgence of COVID-19
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-1-1.pdfNovember, 2020
The Advance International Shares Fund returned 8.68% (net) in November, outperforming the MSCI World ex-Australia Index (The Index) in AUD by 1.25%. The index was up 7.43% in AUD terms. Increasingly optimistic news from late-stage Covid-19 vaccinations as well as continued support from central banks have driven positive market sentiment this month.
At the underlying fund manager level, it was a good month with most managers generating positive excess returns. River and Mercantile was the largest positive contributor to relative performance. The manager’s approach to investing favours discounted securities which outperformed delivered with the arrival of positive vaccine news. On the other side, AQR was the largest detractor due to weaker stock selection across most sectors, the strategy is a multi-factor approach and can underperform at inflection points.
From a regional perspective, most regions were positive with stock selection in North America the largest contributor to relative returns. The overweight to Emerging Markets detracted slightly from relative returns, given the MSCI Emerging Markets Index in AUD only rose 4.12% over the month. In terms of the overall sector view, the largest positive contributors came from the underweight to and stock selection in Information Technology. The largest detractor was the underweight to Healthcare. At a stock level, the largest positive contributors were the underweight to Microsoft Corporation and Amazon.com, Inc., while the largest detractor was an overweight to Alibaba Group Holdings and an underweight to Tesla inc.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet-1.pdfOctober, 2020
The Advance International Shares Fund returned 0.10% (net) in October, outperforming the MSCI World ex-Australia Index (The Index) in AUD by 1.23%. The index was down 1.13% in AUD terms. The sell-off was driven by IT and Healthcare, the two biggest sectors in the index.
At the underlying fund manager level, it was a good month with nearly all managers generating excess returns with the only exception being AQR. T. Rowe was the largest positive contributor to relative performance and whose focus on companies with accelerating earnings, continues to find favour in the current market environment. Healthcare names were the strongest contributor to performance, but it was also financials such as Charles Schwab that boosted relative returns. Value-orientated managers, River and Mercantile and Realindex outperformed this month as interest rates edged higher with Financials, Utilities, and Materials outperforming the index. Despite a value bias, AQR underperformed which can happen at ‘inflection points’ as momentum shifts. Stock selection in the US was the main detractor.
From a regional perspective, all regions were positive with stock selection in North America the largest contributor to relative returns. The overweight to Emerging Markets also added to relative returns, given the MSCI Emerging Markets Index in AUD rose 4.17% over the month. In terms of the overall sector view, the largest positive contributors came from stock selection in Information Technology. The largest detractor was the underweight to Utilities. At a stock level, the largest positive contributors were the underweight to SAP se (German Software company) and an overweight to Charles Schwab, while the largest detractor was an underweight to Alphabet and an overweight to Fortive.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Advance-International-Shares-Multi-Blend-Fund-factsheet.pdfticker: ADV0053AU
commentary_block: Array
factsheet_url:
Fund factsheet / Fund update
http://www.advance.com.au/funds/sector-multi-blend-funds/international-shares-multi-blend-fund.asp
release_schedule: Monthly
fund_features:
Advance International Shares Multi-Blend Fund is a reasonable multimanager offering for those seeking diversified exposure to global equity strategies.
- The portfolio has experienced different investment managers and weightings over the years and underwent further changes in late 2018 with the removal of longtime active incumbent MFS in favour of the existing suite of Wellington strategies and appointment of another systematic strategy, First Sentier’s RealIndex.
- The Fund invests in a wide range of international shares listed, or expected to be listed, on world stock exchanges, including emerging markets and across a diverse range of industries.
- In mid-March 2020, the allocation targets for the portfolio were AQR (20%), T. Rowe Price (15%), Ardevora (15%), RealIndex (15%), River and Mercantile (10%), and a Wellington mandate consisting of three different funds (25%).
manager_contact_details: Array
asset_class: Foreign Equity
asset_category: Large Blend - Multi-Manager
peer_benchmark: Foreign Equity - Large Multi-Manager Index
broad_market_index: Developed -World Index
structure: Managed Fund