September, 2023
During the month of September, equity markets in Australia posted negative returns with the ASX 300 declining as the higher for longer sentiment gained momentum. Despite this, the energy sector demonstrated resilience, while real estate and information technology stocks performed poorly. Towards the end of the month, fresh highs for the US 10-year yield and rising oil prices weighed on ASX 300. The CPI figure announced in August rose to 5.2% in line with expectations, while core inflation fell to 5.5%. At the same time, retail sales increased slightly during the month of August and the unemployment rate remained steady.
In September, Momentum detracted slightly, while Value and Quality had a positive impact on performance over the month. On the other hand, stock specific effects, which are not attributable to any proprietary factor, had a negative impact.
Impact from active sector weights, which are a by-product of the multi-factor optimisation process, was positive over the month. Here, both our overweight in the Energy sector and our underweight in Property Trusts had a positive impact, while our underweight in the Consumer Staples sector contributed negatively to results.
Contributors to performance
Over September, the Australian multi-factor model performed positively. Value outperformed Quality and Momentum, but all three factors ended the month in positive territory. Within Momentum, Earnings Momentum outperformed Price Momentum. Consumer discretionary, health care and IT were the best performing sectors.
Within our Australian universe, the highest rated stocks identified by our multi-factor model outperformed the broader market, while the least attractively rated stocks underperformed.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Class-A-Monthly-Report-1.pdfAugust, 2023
During the month of August, equity markets in Australia posted negative returns with the ASX 300 declining due to weak sector performances from utilities, consumer staples and industrials. The Reserve Bank of Australia opted to hold interest rates at 4.1% citing the fact that past increases had shown signs of cooling demand. It is now forecasting inflation falling back to target in late 2025. In addition, Australia's unemployment rate rose by 20bps from 3.5% to 3.7%, while the Q2 year-on-year wage growth slowed to 3.6%, below estimates of 3.7%.
In August, Value detracted slightly, while Momentum and Quality had a positive impact on performance over the month. On the other hand, stock specific effects, which are not attributable to any proprietary factor, had a negative impact.
Impact from active sector weights, which are a by-product of the multi-factor optimisation process, was positive over the month. Here, both our overweight in the Energy sector and our underweight on the Health Care sector had a positive impact, while our underweight on the Gold sector contributed negatively to results.
Contributors to performance
Over August, the Australian multi-factor model posted positive results, with Quality, Momentum and Value ending the month in positive territory. All three factors showed a constant positive performance over the whole month. Among the factors, Quality was the strongest in the model.
Within our Australian universe, the highest rated stocks identified by our multi-factor model outperformed the broader market, while the least attractively rated stocks underperformed.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Class-A-Monthly-Report.pdfJuly, 2023
Australian equities were broadly positive in July, benefiting from the pause in RBA rate hikes. Led by Energy and Financials, most sectors bounced off their lows for the month, with the exception of staples and health care. The gap between earnings and dividend yields vs. AU 10Y has continued to narrow, while dividend yields are now at parity with bond yields. Valuations are above average, while earnings momentum is still lagging.
In July, Momentum detracted slightly, while Value and Quality had a significantly positive impact on performance over the month. Stock specific effects, which are not attributable to any proprietary factor, had a positive impact as well.
Impact from active sector weights, which are a by-product of the multi-factor optimisation process, was slightly negative over the month. Here, our marginal underweight in the Consumer Staples sector had a negative impact, while our overweight in the Consumer Discretionary and Energy sectors contributed positively to returns.
Contributors to performance
Over July, the Australian multi-factor model posted moderately positive results, with Quality and Value ending the month in positive territory. Momentum had a weak start to the month but was able to manage a flat performance to end the month. Among the factors, Value was the strongest in the model, while Quality was close behind.
Within our Australian universe, the highest rated stocks identified by our multi-factor model were flat, while the least attractively rated stocks outperformed.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Class-A-Monthly-Factsheet-JUL23.pdfJune, 2023
Over June, the Australian multi-factor model moved back into positive territory, with Quality and Value posting strong results. Momentum had a good start to the month but declined in the last few trading days to end the month flat. Value was the strongest factor in the model with all underlying signals contributing positively.
Within our Australian universe, the highest rated stocks identified by our multi-factor model performed in line with the broader market, while the least attractively rated stocks underperformed.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Class-A-Monthly-Factsheet-JUN23.pdfApril, 2023
The Australian equity market had a positive month in April, supported by the upgraded growth outlook in Europe. Nearly every sector in the ASX 200 was in the green for the month, with technology and industrials leading the gains, and materials being the only sector in the red. The March quarter inflation figures for Australia showed a headline rate of 7.0% and a core rate of 6.6%, with services inflation still being strong. March's labour market data was better than expected, however there are indications that future job gains may be harder to achieve. With the mixed economic sentiments, the Reserve Bank of Australia (RBA) paused on rate hikes in April, but it is uncertain whether the hiking cycle is over.
In April, Momentum and Quality had a slightly positive impact on performance, whereas Value contributed negatively to active returns over the month. Stock specific effects, which are not attributable to any other factor, had a negative impact on active returns.
Impact from active sector weights, which are a by-product of the multi-factor optimisation process, was negative over the month. Here, our marginal overweight in the Materials sector had a negative impact on returns.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Monthly-Report-R-Class-A-MAY21-6.pdfMarch, 2023
Australian equities eked out a small positive return in March, led by Gold stocks. The RBA raised its overnight cash rate target by 25 basis points to 3.6%, the tenth consecutive meeting with a rate rise announcement. Some bank failures in the US forced the Federal Reserve to introduce additional liquidity measures to support confidence and minimise the risk of contagion. Real Estate was the worst-performing sector as US banking issues and tight credit amplified existing concerns regarding Commercial Real Estate (CRE). Value outperformed Growth, largely due to strong returns for Resources, while Quality outperformed both as investors sought out lower risk equities in response to US banking concerns.
In March, Momentum and Value had no significant impact on performance, whereas Quality had a positive contribution to active returns over the month. Stock specific effects, which are not attributable to any other factor, had a negative impact on active returns.
Impact from active sector weights, which are a by-product of the multi-factor optimisation process, was negative over the month. Here, our underweight in Real Estate assisted, while the underweights in Gold and Health Care detracted.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Monthly-Report-R-Class-A-MAY21-5.pdfFebruary, 2023
Australia's equity market declined during the month of February. Comments by US Federal Reserve officials, pointing towards a more prolonged restrictive monetary policy, led stocks to fall. Investors' concerns over falling spot prices caused prices of Material stocks to fall significantly, putting further downward pressure on the index. February coincides with interim and final reporting season for the majority of Australian companies and this led to significant dispersion in returns.
Contribution from our multi-factor model was negative in February, despite moderately positive predictive power of the model. Momentum and Quality both contributed negatively to performance, whereas Value had a positive contribution to active returns over the month. The Stock specific effects, which are not attributable to any other factor, had a negative impact on active returns.
Impact from active sector weights, which are a by-product of the multi-factor optimisation process, was neutral over the month. An overweight in the Energy sector contributed positively to the performance and was offset by a negative contribution due to an underweight of the Information Technology sector.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Monthly-Report-R-Class-A-MAY21-4.pdfJanuary, 2023
Australian equities rallied over the month of January. The strong start to the year was mostly driven by a positive flow of news that indicated US inflation may moderate and reduce the forecast peak of monetary policy target interest rates. Sentiment was further supported in Australia with optimism regarding China's reopening and somewhat lower than expected Australian employment numbers. Consumer Discretionary and Materials stocks led the market higher, while Utilities and Energy lagged.
Our multi-factor model had a slightly negative effect on the active performance in January. Value and Quality contributed slightly positively to relative return during the month, while Momentum had a negative impact on returns. Stock-specific effects, which are not attributable to any other factor, weighted negatively on performance.
Impact from active sector weights, which are a by-product of the multi-factor optimisation process, was neutral over the month. While our underweight in the utilities sector and our underweight in the health care sector added positively to performance, our overweight in the energy sector and underweight in financials sector had a negative impact on performance.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Monthly-Report-R-Class-A-MAY21-3.pdfNovember, 2022
Performance commentary Australian stocks rose strongly over November, with all sectors finishing up. Gains were led by Utilities and Materials, largely as sentiment around iron ore turned positive on China's property support measures and potential reopening. Consumer Discretionary and Financials sector lagging behind, but still closing in positive territory.
Our multi-factor model had a slightly positive effect on the active performance in November. Value and Quality contributed slightly positively to relative return during the month, while Momentum had a small negative attributed impact on returns. Stock-specific effects, which are not attributable to any other factor, weighted positively on performance.
Impact from active sector weights, which are a by-product of the multi-factor optimisation process, was neutral over the month. While our underweight in the Consumer Discretionary and overweight in the Materials sector added positively to performance, our underweight in the Utilities sector and overweight in the Energy sector had a negative impact on performance.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Monthly-Report-R-Class-A-MAY21-2.pdfOctober, 2022
The Australian market soared over October, with the majority of sectors finishing the month higher. The Financials and Energy sectors showed the best performance while the Consumer Staples and Materials sectors were the laggards, being the only sectors ending the month in negative territory. Meanwhile Australian unemployment rate stabilised while CPI inflation continued to rise, reaching its highest level (7.3%) since 1990.
Our multi-factor model had a positive effect on the active performance in October. Momentum and Quality contributed positively to relative return during the month, with Momentum having the largest impact. Value weighted negatively on performance. Stock-specific effects, which are not attributable to any other factor, weighted positively on performance.
Impact from active sector weights, which are a by-product of the multi-factor optimisation process, was slightly negative. Here, our overweight in the Industrials and the Energy sector added positively to performance while our overweight in Materials sector had a strong negative impact on performance.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Monthly-Report-R-Class-A.pdfSeptember, 2022
The Australian market plummeted during September, with all sectors finishing the month lower as global central bank rhetoric remains hawkish. Utilities and Real Estate were the laggards, while Health Care and Consumer Staples performed relatively well in comparison. The global central bank tightening cycle and earnings downgrades on broad commodities (excluding lithium) weighed on the Australian stock markets. The small gains of the Australian Index ASX200 over the first full week in September couldn't compensate the losses over the month and the index closed in deep red numbers.
In this environment, the portfolio performed -5.32% (gross of fees) relative to a benchmark return of -6.29%.
Our multi-factor model had a positive effect on the active performance in September. Value, Quality and Momentum contributed positively to relative return during the month. Stock-specific effects, which are not attributable to any other factor, weighted negatively on performance.
Impact from active sector weights, which are a by-product of the multi-factor optimisation process, was slightly positive. Here, our overweight in the Consumer Staples sector and Materials sector added the most to performance while our overweight in Information Technology sector decreased performance.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Monthly-Report-R-Class-A-MAY21-1.pdfAugust, 2022
Performance Commentary Australian equities gained slightly over August, mainly driven by strong gains in the Energy sector. The Materials and Telcos sectors showed a positive performance over the last month as well, while the Real Estate and Consumer Staples sectors lagged the most. During the month the RBA (Reserve Bank of Australia) increased its cash rate by 50bps to 1.85% due to further increasing inflation. Data wise, Australian wage price data surprised to the downside, with the price index rising in the second quarter.
In this environment, the portfolio performed 1.05% on a gross basis relative to a benchmark return of 1.18%.
Our multi-factor model had a negative effect on the active performance in August. Quality and Momentum contributed positively to relative return during the month while Value had a negative effect on the monthly performance. Stock-specific effects, which are not attributable to any other factor, further weighed on the negative performance.
Impact from active sector weights, which are a by-product of the multi-factor optimisation process, was positive. Here, our overweight in the Materials sector and underweight in the Financials sector added the most to performance while our underweight in Telecommunication Services sector decreased performance.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Monthly-Report-R-Class-A-MAY21.pdfJuly, 2022
Australian equities rallied in July, driven by a surge in growth stocks that had heavily de-rated this year amid inflationary pressures and subsequent interest rate increases. Inflationary pressues worsened over the past quarter - the Australian CPI further increased from 5.1% year-on-year in March 2022 to 6.1% year-on-year in June 2022. The Australian share market registered a 5.74% gain over the month of July, however over a 1-year period the index remains negative with a -6.05% loss. Information Technology was the strongest performing sector for the month, closing up 15.23%, and Materials was the only sector to close July in the red, down -0.67%.
In this environment, the portfolio performed 5.19% on a gross basis relative to a benchmark return of 5.95%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Class-A.pdfJanuary, 2022
Australian equities faced challenges in January as looming monetary policy tightening hampered growth sectors around the world. After a strong start to the year, the ASX 200 index erased all gains following Fed meeting minutes which signalled the potential for earlier and faster rate hikes along with balance sheet reductions. Energy stocks were the best performers of the month, while tech stocks lagged the most. Macroeconomic data came in mixed: consumer prices rose year over year, but the labour market continued to recover as the unemployment rate fell to 4.2%, beating consensus. Despite this, it is predicted that the Reserve bank will resist pressures to hike interest rates for the remainder of the year.
In this environment, the portfolio performed -6.76% on a gross basis relative to a benchmark return of -6.45%. Our multi-factor model added to the active performance in January. Momentum and Quality underperformed, while Value contributed positively. Stock-specific effects, which are not attributable to any other factors, had a negative impact.
File:December, 2021
The Australian equity market finished 2.65% higher in December as concerns eased over the impact of the Omicron variant on Australia s economic recovery, and as the RBA announced its decision to leave its official interest rate target on hold at 10bps.
Utilities stocks were the best performers of the month, while IT stocks were the biggest laggards following the Wall Street tech sell-off. The buy-now-pay-later (BNPL) sector was particularly hard hit, as the US Consumer Financial Protection Bureau launched an inquiry into the sector. On the bright side, a moderate decrease in unemployment was seen this month.
In this environment, the portfolio performed 4.19% on a gross basis relative to a benchmark return of 2.65%. Our multi-factor model was the largest driver of active performance in December. In line with model performance, all three factors added to relative performance. Stock-specific effects, which are not attributable to any other factors, also had a positive impact.
File:November, 2021
The Australian equity market saw a continuation of the negative trend that entrenched in September. Even though the markets had an optimistic start into November, the overall performance over the month was negative as the uncertainties about higher inflation, the central bank's response to it and the development of the pandemic persisted. Meanwhile, continued concerns over rising inflation sent the markets further into a downturn with high growth stocks being amongst the ones most affected. The biggest hit that the Australian equities had to take in November came, however, from the news of a new COVID variant 'Omicron'. On the bright side, the markets saw some support from positive earnings announcements, increased business activity and a moderate decrease in unemployment.
In this environment, the portfolio performed -1.00% on a gross basis relative to a benchmark return of -0.53%.
File:October, 2021
The downward movement of Australian equities that started in September, marking the first monthly losses of the year, continued into the first week of October. The ASX200 was able to post consistent gains but couldn’t quite recover the losses finishing the month of October in negative territory. The markets were mainly driven by surging oil prices amid the current energy crisis, Australia’s slow lifting of its lockdown restrictions and international travel ban and RBA’s policy to deal with rising inflation. Energy stocks gained from OPEC+ announcement to continue with its current production, though the gains were reversed later in the month. The announced lifting of the travel ban benefited travel stocks. Overall, the best performing sector of the month was IT, while industrials incurred highest losses. The RBA sees the impacts of global supply chain disruptions on the overall inflation as limited and promised to keep pursuing its supportive monetary policy. At the same time, Australian CPI rose quarter-on-quarter beating expectations.
In this environment, the portfolio performed -0.55% on gross basis relative to a benchmark return of 0.10%.
File:September, 2021
In this environment, the portfolio performed -1.90% on a gross basis relative to a benchmark return of -1.89%. Our multi-factor model slightly detracted from relative performance in September: Value stood out on the negative side with investors largely ignoring valuations. Quality slightly added to active performance alongside our Momentum factor. Both factors were, however, unable to compensate for the negative Value contribution.
Impact from active sector weights, which are a by-product of the multi-factor optimisation process, was positive. Overweights in the Energy and the consumer discretionary sectors were the largest contributors. Other factors slightly weighed on active performance.
File:August, 2021
Australian equity markets climbed higher in July, but performance varied on a week-by-week basis. COVID-19 was at the forefront of the index action at the start of the month with the market reacting poorly to news that Australia was at the back of the queue to receive the COVID-19 vaccines despite the widespread lockdowns. The ASX200 climbed to a weekly high on the back of an expanding service sector, only to reverse the gains as new restrictions were announced and the lockdown extended in New South Wales. Strong commodity prices and spot gold & US gold futures lifted demand for mining stocks mid-month, but gains were checked by extensions of the lockdown in Victoria. From a sector perspective, Materials lead the gains throughout the month of July with IT being the biggest laggard.
In this environment, the portfolio performed 1.46% on a gross basis relative to a benchmark return of 1.11%.
Our multi-factor stock selection model added to relative returns during the month with Momentum being the strongest contributor. Our exposure to attractively valued stocks weighed on return, while impact from Quality was flat.
File:July, 2021
Australian equity markets climbed higher in July, but performance varied on a week-by-week basis. COVID-19 was at the forefront of the index action at the start of the month with the market reacting poorly to news that Australia was at the back of the queue to receive the COVID-19 vaccines despite the widespread lockdowns. The ASX200 climbed to a weekly high on the back of an expanding service sector, only to reverse the gains as new restrictions were announced and the lockdown extended in New South Wales. Strong commodity prices and spot gold & US gold futures lifted demand for mining stocks mid-month, but gains were checked by extensions of the lockdown in Victoria. From a sector perspective, Materials lead the gains throughout the month of July with IT being the biggest laggard.
In this environment, the portfolio performed 1.46% on a gross basis relative to a benchmark return of 1.11%.
File:June, 2021
The ASX closed higher in June, marking its ninth consecutive monthly gain. Inflation remained a key theme throughout the month, with a Federal Open Market Committee (FOMC) in the US making comments about future tightening, alongside the spread of the Delta COVID-19 variant, causing shifts in the market. The Aussie market started the month strongly, reaching record highs. As broadly expected, the RBA left its policy unchanged, keeping the cash rate and 3 year bond yield target at 0.10%. The RBA continuously suggested an optimistic economic outlook, mentioning that the economic recovery in Australia is stronger than earlier expected.
Australian GDP was stronger than expected at 1.8% quarter-on-quarter, boosting investor sentiment. As the month continued there was limited data domestically, the US Consumer Price Index (CPI) was the data highlight. It also came in stronger than anticipated at 5.0% year-on-year, compared to an expected 4.7%, although it did little to change sentiment regarding the Federal Reserve's (Fed's) tapering. Seven Fed members now expect a rate hike next year, up from four in the March. On tapering, Chairman Powell noted that this meeting was one where they were talking about talking about tapering". The ASX 200 declined -0.83% in the fourth week of June, amid new COVID-19 restrictions coming into place in Sydney. In the final few days of the month, the index was impacted by lockdowns stretching across Australia.
File:May, 2021
The market was then led lower across the week on the back of heightened inflation fears following a strong CPI print in the US. In addition, the Federal Budget was ,announced on the 10th of May. As expected, the 2021 Budget had a focus on fiscal support to foster economic activity. Further, it stipulated a $15B infrastructure spend. Iron ore fell off following remarks from China's state planner that said the nation will ramp up domestic production and look to diversify its iron ore supply. As for economic data, monthly retail sales data was stronger than anticipated at 1.1% (vs 0.5% consensus). The unemployment rate also fell to 5.5% mainly due to a drop in the participation rate. Australian equities closed marginally higher to end the month amid Victoria entering a "circuit breaker" lockdown.
In this environment, the portfolio performed 2.53% on a gross basis relative to a benchmark return of 2.31%. Our multi-factor stock selection model added to relative return during the month with all factors contributing positively during the month. Value stood out on the positive side, followed by Momentum and Quality. The impact from active sector weights, which are a by-product of the multi-factor optimisation process, was marginal. Here, positive contribution from underweights in Financials and Industrials were offset by negative contributions from overweights in the consumer staples and IT sectors. Other factors did not have any impact on relative return in May.
File:April, 2021
The ASX300 ended the month of April in positive territory, with an especially strong start to the month, seeing the best week of the previous nine weeks. Despite the ordering of 20 million more Pfizer doses, reports indicate that the nationwide vaccination program will extend into next year, well after the Morrison government's target of October. Investor sentiment remained positive notwithstanding, and the market continued its rally. On April 8th, the index briefly rose above 7000 points, closing at its highest level since the coronavirus crash. This milestone was reached as the Fed and RBA reiterated their message that rates would remain low to support the economic recovery from the pandemic. Moving into the second week of the month, the ASX advanced further, the fourth straight week of gains. Positive jobs data showed the unemployment rate fell further in March, even as labour force participation rose.
File:March, 2021
Australian equities rallied in March as the S&P/ASX 300 Accumulation Index increased 2.30%. The month began positively on the back of a higher than expected GDP number and a positive run on commodity stocks. Some of the gains can also be attributed to strong business and consumer confidence data as well as accommodating comments from the RBA. However, with a backdrop of rising bond yields, investors rotated out of technology stocks which were largely the pandemic winners, and into value stocks which were largely the pandemic losers. Meanwhile, the energy sector continued to rise on the back of strong commodity prices as OPEC decided to keep production unchanged until at least April. Later in the month, losses in the US rippled into the Australian market following comments made by US Federal Reserve Chairman Jerome Powell, where he suggested that inflation will pick up in the following months. For most of the month, the ASX200 lagged behind its global peers due to a lack of exposure to growth, which has also performed well over the period, despite the rotation out of technology stocks earlier in the month. Overall, the Consumer Discretionary sector registered the largest gains, whilst the Materials sector registered the largest losses.
File:February, 2021
The Australian equity market performed strongly for the major part of February, buoyed by a better than expected reporting season, strong commodity prices and the COVID-19 vaccine rollout underway. Additional support came from news that the Reserve Bank of Australia (RBA) increased its asset purchase program by another A$100 billion. This will extend its program by a further six months until October. Meanwhile, employment figures were released. Although the overall number disappointed, it was positive to see that the number of full-time positions added was much stronger, suggesting that there was a conversion of part-time positions to higher-value long-term full-time positions. In addition, economic data showed positive signs as both the manufacturing index (PMI) and the service index (PSI) increased. Here, the former recorded the strongest increase, rising to 58.8 (55.3 in January).
The rally was damped towards the end of the month by rising government bond yields on fears of a rise in inflation. Longer-dated government bond yields lifted to their highest level in two years, with fears that policy makers have over-stimulated. As a result, the S&P/ASX 200 fell 1.6% in the last trading week, led by a 12.7% sell-off in the technology sector. Resource stocks performed the best in February, supported by strong price movements. Energy stocks also performed well as OPEC+ implemented a unilateral production cut going into March. The Financial sector was a highlight of the month as investors believed the worst is over for the sector, while the Information Technology stocks ended the month with the biggest losses. In this environment, the portfolio performed 1.90% on a gross basis relative to a benchmark return of 1.48%.
File:November, 2020
It was a record month for Australian equities, with stocks soaring to crown the best November for the benchmark and the best month in over 30 years, despite news of rising trade tensions between China and Australia. The S&P/ASX 200 rebounded 9.96% due to the impressive suppression of COVID-19 across the country and the sharp rotation in value and domestic cyclicals.
Stocks got off to a positive start for the month when the RBA announced a new $100 billion government bond purchase program. Economic data also supported equities as the ABS reported the trade surplus increased by A$3 billion to A$5.63 billion in September, with export values up 4% and imports down 6%.
The stock market closed at its highest level since March following the US election, despite President Donald Trump's legal challenges to the result. In addition, better than expected job data and news of the successful development of a vaccine from Pfizer and Biontech drove stocks higher. Over the month, energy stocks and financials were favoured the most and outperformed the broader market whereas Consumer Staples stocks closed the month in negative territory. Smaller capitalised stocks outperformed their larger counterparts over the course of the month.
In this environment, the portfolio performed 9.33% on a gross basis relative to a benchmark return of 10.23%.
Our multi-factor stock selection model had a negative impact on relative performance with both our Earnings Momentum and Price Momentum factors detracting from active return. Quality and Value, on the other hand, were slightly positive in the portfolio but unable to offset Momentum's detraction. Stock-specific effects, which cannot be attributed to any other factors, further weighed on return.
Other factors also weighed on active performance. The contribution from active weights in sectors, which are a by-product of the multi-factor optimisation process, was flat. Here, Overweights in the materials and health care sectors were the largest contributors, while underweights in financials as well as in communication services had the largest negative impact.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Monthly-Report-R-Class-A-NOV20.pdfOctober, 2020
Factor performance was mixed in Australia last month. At the beginning of the month strong market gains were led by earnings momentum. However, as investors became less risk averse, quality and low volatility were the main laggards in this early month period. As markets lost their steam in the second half of October and volatility came back, a mid-month rotation occured which favoured defensive factors, and quality and low volatility bounced back. Quality was unable to offset the losses from the first half of the month however and remained negative. Momentum remained relatively resilient but traded in a volatile fashion and ultimately finished the month in flat territory. Value was not rewarded throughout October. Consequently, our highest rated stocks underperformed relative to the Australian universe, while the least attractively rated stocks outperformed the broader market.
During the month we made several adjustments to the portfolio as a result of our multi-factor portfolio optimisation process. Amongst others, we increased our position in Sonic Healthcare based on its strong momentum and value scores. On the other hand, we decreased our position in CSL as a lower earnings momentum score made the stock’s risk-return profile look less appealing.
The ex-ante tracking error of the fund was 2.33% (ex post indicative range 2-3%) at month-end. At 94%, the major part of active risk is associated with our multi-factor model, which includes stock-specific risks as a by-product of our stock selection process. Risk indices representing other style exposures within the portfolio contributed 4% to active risk. Industry risk contribution, a by-product of stock selection, represented an additional 1%. Within a product specific range, the portfolio beta was 0.98 at month-end.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/Invesco-Wholesale-Australian-Share-Fund-Monthly-Report-R-OCT20.pdfticker: CNA0811AU
commentary_block: Array
factsheet_url:
https://www.invesco.com.au/home/funds/invesco-wholesale-australian-share-fund-class-a
Under ‘Fund” ==> In Focus
https://www.invesco.com/au/en/funds/invesco-wholesale-australian-share-fund.html
release_schedule: Monthly
fund_features:
The Invesco Wholesale Australian Share Fund aims to provide long-term capital growth and distributions by investing in securities listed on the Australian sharemarket. The fund uses S&P/ASX 300 Accumulation Index as the benchmark.
- Invests in Australian shares listed on the Australian sharemarket.
- The managers take a quantitative approach to investing in Australian shares.
- Actively takes a position in Australian shares with the aim of delivering consistent returns above its benchmark.
- The team distils down from a universe of stocks with a minimum market cap of A$100m to construct a final portfolio of between 60-90 stocks.
manager_contact_details: Array
asset_class: Domestic Equity
asset_category: Australia Large Blend - Core / Style Neutral
peer_benchmark: Domestic Equity - Large Cap Neutral Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund