August, 2023
Strategy performance was mixed over August, Sentiment gained slightly, while Themes and Fundamentals finished flat to negative.
Within Sentiment, individual signal performance was mixed but ended positive overall. Insights constructed from analysis of conference calls, on-line job postings and corporate access all posted flat to negative returns over the month. However, smart money, brand sentiment, and analyst-based insights offset those results.
Macro themes signals drove overweights in Nvidia and Amazon, which were amongst the top contributors to positive returns in August. Nvidia blew away consensus expectations on the top and bottom line and announced an additional share buyback, while Amazon posted its biggest earnings beat since its report for the fourth quarter of 2020 and issued optimistic guidance. Detractors included tactical signals, as well as a macro insight looking at Chinese industries.
In stock selection, Fundamental Value and Quality insights aligned most with escalating concerns around the impact of higher rates on valuations and growth. Within the Value complex these were signals that looked at book-to-price and forecasted earnings per share. Within Quality, insights focused on profitability continued their positive streak. However, these gains were eased by Quality signals that seek to predict dividends and those that look at company disclosures.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-16.pdfJuly, 2023
The portfolio outperformed in July, driven by Themes while Fundamentals and Sentiment finished flat.
Across Macro Themes, underweights across defensive parts of the market such as Healthcare, Telecom, Utilities, and overweights across cyclical parts such as Energy were the top driver of portfolio returns along the industry dimension. Underweights in the Financials industries particularly Diversified Financials and Banks hurt portfolios as the quarterly earnings season showed resilience across this segment of the market post SVB crisis. Exposure to AI theme which was one of the key drivers of portfolio performance over Q2 continued be net positive over July.
Fundamentals finished the month flat but positive. Value signals were the top performer as market optimism around a goldilocks scenario increased over the month. While the aggregate Quality bucket outperformed for the month, there was dispersion across this set of signals. Those that are tilted towards low risks struggled as optimistic investors favoured high-risk names. On the other hand, quality signals focused on profitability continued their positive streak.
ESG signals struggled especially those that have a negative tilt towards traditional oil companies as oil prices made a recovery through the month following falling concerns around demand and increased probability of a soft-landing.
The Sentiment complex also finished flat but negative. Experiencing a reversal from last month, measures tracking mobile app usage and conference calls were among the bottom performers.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-15.pdfJune, 2023
The strategy portfolio outperformed in the second quarter 2023. Sentiment and Themes drove positive performance while Fundamentals were flat.
As the market breadth broadened in June there was a rebound in performance. This was led by bottom-up Sentiment insights. Faster moving insights using NLP text analysis, online sales and web traffic were among the top performers.
Macro Themes performance was mixed during the quarter but finished positive. On one hand, strongest gains across the macro insights were centred around signals focused on more granular themes such as AI beneficiaries, and stocks with adverse exposure to the challenges across the US banking industry and commercial real estate. However, pro-inflation/defensive themes which were winners over 2022 and industry selection continued to struggle for traction against frequent rotation in leadership, most notably in Health Care.
Within Fundamentals, traditional valuation and anti-growth signals which were amongst the top performing signals in 2022 struggled during this period; underperforming earlier in the quarter before recovering through June. Quality measures evaluating companies’ financing were also additive over the period while ESG insights struggled as investors focused on macro dynamics and AI.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-2-1.pdfMay, 2023
The MSCI World Ex Australia Index gained 1.2% in unhedged AUD terms and declined 0.2% in fully hedged to AUD terms in May 2023. Most major asset classes declined in May as US debt ceiling negotiations dominated headlines. Global equities, as measured by the MSCI World Ex Australia Index (hedged), were down 0.2%, while the unhedged index finished the month up 1.2% as currency moves offset the decline in international share prices. Technology stocks were a positive outlier in May buoyed by upbeat sentiment around generative artificial intelligence, which prevented the broader equity index from falling further. Developed Markets outperformed their Emerging Market counterparts, with divergences observed across geographies and sectors. Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index (hedged), also closed the month down 0.5%.
The strategy portfolio underperformed in May, with most insight groups negative. Sentiment led the underperformance for the month, specifically the machine learned complex. Online sales, web traffic and brand sentiment contributed positively but not enough to offset losses elsewhere. Within Value, signals that were the top performers over 2022 such as long-term reversal and anti-growth struggled the most. Within the Quality suite, contrarian quality signals led the underperformance of the fundamentals complex. Across Macro, positioning in energy, pharma, and food producers where the portfolios are overweight were amongst the top contributors to negative performance over the month. All of these are pro-inflation/ defensive themes which were winners over 2022 and drove positive fund performance last year. Another area that was problematic over the month was positioning within the semiconductor industry
File:April, 2023
The MSCI World Ex Australia Index gained 3.16% in unhedged AUD terms and 1.64% in fully hedged to AUD terms in April 2023. Financial markets were relatively calm over April despite the uncertain macroeconomic outlook.
Global equities, as measured by the MSCI World Index, increased by 3.1% over the month in Australian dollar terms as investor sentiment held steady. Developed Markets outperformed their Emerging Market counterparts. Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index (hedged), remained relatively volatile but also closed the month in positive territory up 0.4%.
File:March, 2023
Overall, the model ended the quarter in the positive territory after a negative start to the year. Macro Thematic and Sentiment insights regained traction through the quarter. On the other hand, Fundamental signals finished the quarter negative. A sharp rotation in market leadership was observed over the opening weeks of 2023 and the portfolio retained exposure to several 2022 winning macro trades that detracted from performance such as an overweight in Energy, Healthcare and Staples. However, Macro insights regained traction over the remainder of the quarter with stubbornly hawkish central bank rhetoric and renewed turmoil in the banking sector re-igniting growth concerns. The stock selection across IT also ended up contributing to performance. The Sentiment complex, along with the Macro Thematic insights, emerged as the dominant driver of performance following the challenging start of the year. Proprietary measures of momentum detracted but suffered a shallower drawdown than traditional insights. For the remainder of the quarter, a strong recovery in performance from bottom-up measures such as broker, management and hedge fund sentiment added to performance as investors refocused on forward looking measures of sentiment. Within the Fundamental signal complex, Value signals were the worst performers mainly due to their positioning in Financials. Quality signals also struggled during the quarter. Specifically, contrarian quality strategies tracking levels of equity dilution were among the main detractors.
File:February, 2023
The portfolio generated a small outperformance to the benchmark, primarily attributable to positive Sentiment signals. In contrast to the previous month, Quality signals that measure firms’ capital financing were among the weakest performing signals during the period. Along the ESG dimension, results were mixed with signals tracking carbon commitments showing negative performance and human capital corporate culture measures contributing positively. Within the Value complex, signals observing balance sheet ratios performed well while measures of fundamental value focused on short term mean reversion detracted. Within Sentiment, several measures of forward-looking momentum recovered January losses. These included insights designed to track the sentiment of analysts and company management. Additionally, a signal evaluating product ranking among online retailers was among the top contributors.
However, a signal tracking mobile app usage detracted from performance. Macro Tactical signals had positioned the portfolio for a continuation of the softer inflation/macro landing which had played out over the turn of the year. However, February saw positioning from these insights generally run against the grain of a re-emerging inflationary impulse. Notably, poor performance from normally inflation defensive US Healthcare stocks provided a further data-point suggesting some level of disconnect between equity and fixed income markets. Additionally, an overweight position in Canadian Energy stocks represented a pro-inflation stance which, more intuitively, failed to protect the portfolio.
File:December, 2022
The MSCI World Ex Australia Index gained 3.95% in unhedged AUD terms and 7.17% in fully hedged to AUD terms in Q4 2022. Major asset classes rose over the final quarter of 2022, although growing recession fears saw sentiment wane in December. Global equities, as measured by the MSCI World Index, increased by 3.9% over Q4 in Australian dollar terms, supported by the unwinding of China’s zero-COVID policy and softer inflation data. Emerging Markets outperformed their Developed Market counterparts. For the full year, global equities remain in negative territory at -12.5%. Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index (hedged) gained 0.6% over the quarter after suffering sharp losses earlier in the year.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-14.pdfNovember, 2022
The MSCI World Ex Australia Index gained 2.02% in unhedged AUD terms and 5.43% in fully hedged to AUD terms in November 2022. The recovery in global equity and fixed income markets continued over November. Risk assets gained amid speculation that monetary tightening by global central banks has begun to moderate, while policy developments in China and softer inflation data across key economies supported investor sentiment.
Global equities, as measured by the MSCI World Index, increased by 2.0% over the month in Australian dollar terms, with Emerging Markets outperforming their Developed Market counterparts. Fixed Income markets also saw positive performance, with global bonds closing the month up 2.4% and Australian bonds rising by 1.5%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-13.pdfOctober, 2022
Signal performance was generally strong across the board, with Fundamental insights leading the charge. Fundamental signals performed strongly across Value, ESG, and traditional Earnings Quality. Within Value, long term reversal signals performed well as markets switched strongly to optimism again around a dovish pivot for the Fed, with a shift in market preference toward Value rewarding Energy and Financials. Quality insights added in a market focused on sustainability of earnings, with measures preferring firms with lower levels of equity issuance (and higher levels of equity retirements) performing well.
Additionally, firms exhibiting good ESG behaviours added, with those names less likely to be exposed to ESG controversies rewarded during the month. Names associated with creating credible carbon reduction commitments were also an important alpha contributor. Macro themes performed strongly over the month, successfully navigating the gyration in market movements, particularly profiting from overweights in Energy on the back of their renewed optimism. Sentiment signals added too, with insights preferring firms with increased number of users on their own mobile apps, and other trend-based insights, adding some value as well. Though some trend following insights and shorter-term tactical views detracted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-12.pdfSeptember, 2022
The strategy underperformed over the quarter. The bulk of losses coming from Fundamental and Macro signals, with Fundamental signals—particularly Value—detracting the most. Sentiment signals were a bright spot for the model despite a muted result towards the end of September.
On the Fundamental side, Value signals lost out particularly over the beginning and end periods of the quarter as gyration in styles continued. On the negative side, value-oriented signals observing book to price ratios also lost out. Another signal observing the ratio of Research and Development spend relative to market price also detracted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-11.pdfAugust, 2022
The strategy outperformed the benchmark with negative performance from the traditional Earnings Quality signals, helped by a strong result from Sentiment-based strategies as well as faster moving tactical signals. The portfolio’s largest gain came from Sentiment signals. In particular, signals using Machine Learning to predict the effect of corporate events continued to add value this month. Information on stocks seeing the highest levels of prime broker ability also gave the portfolio gains through following the movements of informed investors.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-10.pdfJune, 2022
The MSCI World Ex Australia Index declined 8.42% in unhedged AUD terms and 15.10% in fully hedged to AUD terms in Q2 2022.
The second quarter of the year was marked by volatility, with equities and fixed income selling off on the back of recessionary concerns, high inflation, and tightening financial conditions. Global equities finished the quarter down 15.5%, with Emerging Markets outperforming Developed Market counterparts. Fixed income markets were challenged by higher yields particularly at the start of the quarter, before reclining downwards towards the end of June amidst concerns that policy tightening may hurt the economy.
In the US, the S&P 500 Index declined by 16.1% over the quarter, and by 8.3% over the month of June (in local currency terms). All sectors, including Energy, declined over the month as growth concerns weighed on investor sentiment.
The Federal Reserve (Fed) increased the policy rate by 125bps over the second quarter, as the Fed continues to battle with tightening labour markets and elevated inflationary readings. Headline inflation accelerated further in May, rising 8.6% over the year, with gasoline, food and shelter prices contributing to the increase. While the unemployment rate remained at 3.6% for the third month in a row, consumer confidence index fell sharply as consumer resiliency was tested by the future prospect of persistent inflation. Meanwhile, the Manufacturing PMI index declined from 57 to 52.7 in June, marking the slowest growth in factory activity since July 2020. Market-based interest rate expectations re-priced downwards towards the end of June, reflecting concerns that central banks may be stalling the restart with higher policy rates.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-9.pdfApril, 2022
The MSCI World Ex Australia Index declined 3.17% in unhedged AUD terms and 7.44% in fully hedged to AUD terms in April 2022.
Tightening financial conditions saw equity and bond markets selling off concurrently in April, with multi-decade high inflation rates, hawkish central bank rhetoric and slowing global growth only serving to weigh on investor sentiment. Global equities finished the month in the red, declining by 8.0% in local currency terms, with Developed markets underperforming their Emerging market counterparts.Fixed income markets similarly sold off as yields climbed throughout the month amidst more hawkish expectations around the pace and magnitude of monetary policy tightening.
In the US, the S&P 500 Index detracted 8.7% over the month (in local currency terms), underperforming most other developed markets as growth sectors like Technology and Communications detracted sharply against the backdrop of rising interest rates.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-8.pdfMarch, 2022
The MSCI World Ex Australia Index declined 8.42% in unhedged AUD terms and 5.02% in fully hedged to AUD terms over the first quarter of the year. The first quarter of the year was a volatile one for financial markets. Russia’s invasion of Ukraine, accelerating inflation, exacerbated global energy shock and rate hikes across global central banks added significantly to investor uncertainty over the period. Supply-driven inflation and commodity prices surged following the sanctioning of Russia, with risk assets extending their sharp rebound off the year’s lows. Emerging markets were also weighed down by a new round of Omicron cases and broader geopolitical tensions. The U.S yield curve briefly inverted during the period, prompting recessionary concerns as central banks rhetoric turned more hawkish.
Most global sharemarkets finished the month in the red (in local currency terms). Developed market equities and emerging market counterparts (to a greater degree) declined steeply in a classic risk off move over the period.
The portfolio underperformed the benchmark over the first quarter, though March was a positive month for active returns. Macro Thematic signals detracted over the quarter, though the fastermoving more tactical insights were additive. This included one that trades based on the possibility of a stagflationary environment, driven by the current concerns around growth and inflation. Another insight that trades based on rate spreads to predict policymaker behaviour was also among the most additive signals.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-7.pdfFebruary, 2022
The MSCI World Ex Australia Index declined 5.52% in unhedged AUD terms and 2.75% in fully hedged to AUD terms in February 2022. In February, investors were jolted by Russia’s invasion of Ukraine. Markets, which were already tested by the pandemic, rising inflation, and a global wave of central bank tightening, were further injected with new uncertainty.
The United States and its European counterparts imposed a broad range of sanctions on Russia, the most severe of which banning transactions with the Russian central bank in an effort to restrict Russia from deploying foreign reserves. Further restrictions were placed on major Russian financial institutions with the US also removing Russia from the Swift International Payment System. Despite positive Q4 2021 earnings reports across developed economies, ongoing inflation concerns and central bank tightening remained a primary concern early in the month before investors grappled with rallying energy and materials prices after the commencement of Russia’s invasion.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-6.pdfDecember, 2021
The MSCI World Ex Australia Index gained 7.19% in unhedged AUD terms and 7.90% in fully hedged to AUD terms over the last quarter of 2021.
The last quarter of the year was a volatile one for financial markets. The emergence of the Omicron variant of COVID-19 pushed global case numbers to new highs, adding significantly to investor uncertainty over the period. Despite the tightening of restrictions in some regions, central banks pushed ahead with their normalization plans and took on a more hawkish tilt. Recent data supported the notion that the Omicron variant has a milder effect on the population and hospitalization rates appeared manageable. Investors looked through the noise and volatility in markets and pushed equity prices higher over the period. Nonetheless, concerns around a slowdown in global growth, geopolitical tension, inflation and supply chain constraints remain elevated into 2022
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-5.pdfNovember, 2021
The international stock selection strategy had a positive month in absolute terms and outperformed its benchmark. All insights added during the month, especially Sentiment. Geographically, all regions outperformed. Cross Border Thematics detracted in North America, however, this was more than offset by strong performance of Cross Border Thematics and Sentiment in Europe and Japan.
Looking at sectors, HealthCare was amongst the top contributing sectors thanks to underweights healthcare equipment and supply in the US. Financials also added through underweight in European banks, especially in Spain while Materials benefitted from favourable positioning chemical names in Europe. Conversely, Consumer Staples detracted through unfavourable positioning within the food and beverages industry in the US. Positive contributors to performance included an overweight position in Apple and an underweight position in Paypal Holdings.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-4.pdfSeptember, 2021
The international stock selection strategy had a strong quarter in absolute terms; however, it underperformed its benchmark over the period. In terms of insights, Cross Border Thematics and Value detracted while Sentiment added. Geographically, Momentum drove the positive performance in US, however, this was offset by poor performance in Europe where Cross Border Thematics did not work well.
Looking at sectors, Consumer Discretionary was the main source of underperformance due to overweights textile, apparel and luxury goods and specialty retailers in Europe. Industrials also detracted through overweights within the sector, notably air freight in Europe and North America, while large overweights banks and insurance in North America were a drag on Financials. The Energy sector added thanks to overweights oil, gas and consumable fuels in Norway and the US. Positive contributors to performance included overweight positions in Equinor Asa and Agilent Technologies.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-3-1.pdfAugust, 2021
The international stock selection strategy had a positive month in absolute terms but underperformed its benchmark. All insight groups detracted, especially Momentum and Cross Border Thematics. Geographically, Europe (Cross Border Thematics and Momentum) was the region detracted the most, followed by Japan.
Looking at sectors, The Financials sectors was the bottom contributor due to underweights capital markets and banks in North America. Underweights pharmaceuticals in Europe and the US were also a drag on Heath Care. Consumer Discretionary detracted through overweights textiles, apparels and luxury goods in Europe while underweights entertainment and media in the US hurt the Communications Services sector. On a positive note, Industrials was the top contributing sector, notably thanks to overweights in North America. Positive contributors to performance included overweight positions in Agilent Technology and Workday
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-1-1.pdfJuly, 2021
The MSCI World Ex Australia Index gained 4.03% in unhedged AUD terms and 1.77% in fully hedged to AUD terms in July.
The global economic recovery continued in July with steady progress in the COVID-19 vaccine rollout, a pick-up in mobility indicators (especially in Europe) and ongoing support from a monetary and fiscal policy perspective. However, it was a more volatile month for financial markets due to increasing concerns around rising cases of the more transmittable Delta variant and signs of a peak in economic growth, especially in the US.
Despite the volatility, developed market equities outperformed their emerging market counterparts in July. The positive performance was led by the United States (US) underpinned by a strong corporate earnings season and reassuring central bank comments. Within emerging market (EM) equities, China was a drag on markets as the government tightened regulation in a coordinated crackdown across sectors – adding to uncertainty and pulling share markets lower in the region. The Australian dollar depreciated against most currencies and in particular the US dollar.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-3.pdfJune, 2021
The MSCI World Ex Australia Index gained 9.33% in unhedged AUD terms and 7.56% in fully hedged to AUD terms over the second quarter of 2021.
Most financial markets gained over the quarter, as reopening optimism and the accelerated vaccine rollout continued to drive positive performance across markets. This dynamic continues to be supported by ongoing government support from a monetary and fiscal perspective.
Within equities, developed economies had a particularly positive quarter. Governments in most developed markets have eased COVIDrelated mobility restrictions and activity levels have picked up alongside strong consumption growth, particularly in the US. However, upbeat market sentiment saw pockets of concern due to the spread of the highly transmissible Delta variant, inflation spikes and central bank narratives. The increased spread of the Delta variant has caused renewed virus flare-ups in parts of the world, along with new mobility restrictions in certain countries. Emerging economies continued to lag on the vaccination front, and EM equities underperformed their developed counterparts over the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-2.pdfMay, 2021
The MSCI World Ex Australia Index gained +1.2% in unhedged AUD terms and +1.0% in fully hedged to AUD terms in May 2021.
In May, financial markets were broadly upbeat as the activity restart gathered momentum and the risk-on mood continued with cyclical exposures leading returns once again. Despite volatility in recent macro data amid unusual supply and demand dynamics, interest rate and inflation expectations stabilized, providing a supportive backdrop for risk assets. While concerns around regional resurgences of COVID-19 cases lingered, investors focused on improving vaccination rates, which has allowed many economies to at least partially reopen. Alongside sizeable fiscal support, the accelerated vaccine programs have enabled a rebound in equity and commodity markets, particularly in Europe
In the US, the S&P 500 Index gained 0.7% in May. News headlines were dominated by the higher than expected inflation data for April, and market reactions on the back of it. Inflation rose to 4.2% year on year, which is reasonably high from a historical perspective and caused concern amongst some investors. However, the Federal Reserve was largely unmoved and comments by members suggested that they see higher inflation as transitory – calming market nerves somewhat. Under the new policy framework, the US central bank is expected to have a higher tolerance to moderate inflation overshoots of the 2% target for a short period of time.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/blackrock-advantage-international-equity-fund-fund-update-en-au-1.pdfFebruary, 2021
The international stock selection strategy gained and slightly outperformed its benchmark this month. Amongst insights, Relative Valuation and Cross Border Thematics added while Momentum detracted. Geographically, the main source of outperformance came from Relative Valuation in Japan. Asia also contributed (Momentum) while Europe and US detracted. Looking at sectors, Consumer Discretionary was the top contributing sector thanks to overweights specialty retailers in Japan and the US.
Overweight interactive media & services in the US added to the Communications Services sector while overweights in banks across Europe, Canada and the US helped Financials. US software and semiconductors overweights weighed on Information Technology, the worst performing sector this month. Positive contributors to performance included overweight positions in Twitter and Phillips 66
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https://www.blackrock.com/au/individual/products/254692/blackrock-advantage-international-equity-fund
Fund Update
Note:
in PDF => Strategy Commentary
fund_features:
BlackRock Advantage International Equity Fund aims to outperform the MSCI World ex-Australia Net TR Index (unhedged in AUD) (the ‘Index’) by 2% p.a. over rolling 3-year periods (net of fees), while maintaining a similar level of investment risk to the Index. The Fund invests substantially all of its assets in units of the BlackRock International Alpha Tilts Fund (the ‘Underlying Fund’), another fund managed by us, which has the same investment strategy as the Fund and provides it with exposure to a portfolio of stocks from the world’s developed equity markets.