BlackRock Advantage Hedged Intl Equity (BGL0109AU) Report & Performance

What is the BlackRock Advantage Hedged Intl Equity fund?

BlackRock Advantage Hedged International Equity Fund offers investors exceptionally managed systematic equities backed by a strong research agenda and a low fee to boot, warranting our increased conviction. The Fund aims to outperform the MSCI World ex Australia Index (unhedged/hedged in Australian dollars with net dividends reinvested) before fees over rolling three-year periods, while maintaining a similar level of risk as its benchmark.

  • Value stock strategy.
  • Focus on fundamental, economic, and technical conditions.
  • Exposure to international shares.
  • Typically for long term investment horizon.

Growth of $1000 Investment Over Time

Performance Report

Peer Comparison Report

Peer Comparison Report

Latest News & Updates For BlackRock Advantage Hedged Intl Equity

BlackRock Advantage Hedged Intl Equity Fund Commentary June 30, 2023

The MSCI World Ex Australia Index gained 7.63% in unhedged AUD terms and 7.05% in fully hedged to AUD terms in Q2 2023.

Risk assets performed strongly over the second quarter of 2023. While sentiment was buoyed by a resolution to US debt ceiling negotiations and focus on generative AI, investors saw meaningful regional and sector dispersion across markets. Global equities, as measured by the MSCI World Ex Australia Index, increased by 7.6% over Q2 in Australian dollar terms, with Developed Markets outperforming their Emerging Market counterparts. Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index (hedged) declined 0.3% over the quarter, as sticky inflation and renewed expectations of higher-for-longer rates proved headwinds for government bonds.

In the US, the S&P 500 Index increased by 8.7% over the quarter and by 6.6% in June (in local currency terms). The Information Technology sector was the best performer with the rally highly concentrated among a handful of mega-cap tech companies, although June saw initial signs of equity gains broadening out across sectors. The US Federal Reserve (Fed) increased the Fed funds rate by 25 basis points over Q2 before pausing in June, but hawkishly signaled the likelihood of additional hikes later this year. Meanwhile, core inflation rose 5.3% year-on-year in May in line with consensus estimates and the labour market remains tight despite the unemployment rate edging up to 3.7%. US politicians also reached an agreement towards the end of May to suspend the country’s debt limit until 2025 and cap nondefense spending.

European equity markets, as represented through the Euro Stoxx 50 Index, increased by 3.7% in the second quarter and by 4.3% in June (in local currency terms). Corporate reporting season for Q1 saw European earnings beat analyst expectations but remain modestly lower compared to last year. The European Central Bank (ECB) hiked twice by 25 basis points over the quarter and raised its outlook for inflation – notably the central bank now forecasts inflation for the Eurozone to remain above its 2% target through 2025. Following the June rate decision, ECB President, Christine Lagarde, also struck a hawkish tone and implied that another increase in its policy rate in July was “very likely”. Meanwhile, core inflation ticked up to 5.4% in June, while the Eurozone’s largest economy, Germany, officially entered a technical recession.

In the UK, the FTSE 100 Index lost 0.3% over the quarter but gained 1.4% in June (in local currency terms). The Bank of England (BoE) surprised markets by re-accelerating the pace of interest rate increases – hiking rates by 50 basis points in June – to bring its policy rate to 5.00%. British core inflation increased over Q2, beating expectations to rise by 7.1% year-on year in May, which represents the highest level in over 30 years. There are still no clear signs that inflation has peaked in the UK. Alongside robust wage growth, investors are predicting that the BoE could hike rates multiple times by year end.

Asian equities were mixed over Q2. China’s CSI 300 Index declined by 4.0% over the quarter but rose by 2.1% in June (in local currency terms), with the country’s economic restart losing momentum. In contrast to their global counterparts, the People’s Bank of China (PBoC) lowered key lending rates in June amid increasing growth concerns, which also led to speculation of a potential fiscal stimulus response. China’s official manufacturing Purchasing Managers’ Index (PMI) data continues to show evidence of the weak economic rebound, with factory activity shrinking across the period, while business confidence also hit an eight-month low. Late in June, reports of potential new restrictions by US officials on semiconductor chip exports to China further weighed on sentiment.

Japanese equities, as represented by the Nikkei 225 Index, gained 18.5% over the quarter and rose by 7.6% in June (in local currency terms). The rally has seen Japanese stocks materially outperform their developed market peers over 2023, underpinned by a stronger economic outlook and optimism for corporate reform which has driven a pick-up in foreign investor inflows. The Bank of Japan (BoJ) kept policy unchanged over the quarter with its ultra-supportive stance sustaining inflation above the central bank’s target after decades of disinflation. A leading indicator of nationwide prices, Tokyo core inflation, rose to 3.2% year-on-year in June. Economists also expect the impact of higher wages may eventually put further upward pressure on inflation, with Japanese workers having negotiated large pay raises earlier this year.

READ HISTORICAL PERFORMANCE COMMENTARIES

Product Snapshot

  • Product Overview
  • Performance Review
  • Peer Comparison
  • Product Details

Product Overview

Fund Name APIR Code
? A Product Code is unique a identifier code issued by a group or governing body, to reference products in a large group. For an example, APIR codes are commonly used for Funds and Ticker codes are commonly used for Securities such as ETFs and Stocks.
Structure
?
Asset Class
? An Asset Class breakdown provides the percentages of core asset classes found within a mutual fund, exchange-traded fund, or another portfolio. Asset classes (in microeconomics and beyond) generally refer to broad categories such as equities, fixed income, and commodities.
Asset Category
? An Asset Category is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset categories (or a sub-asset class) are made up of instruments which often behave similarly to one another in the marketplace, looking down to the Asset Category level is important if looking to build a diversified portfolio.
Peer Benchmark Name
? A Peer Index (benchmark) refers to a peer group of investment managers who have the same investment style or category. It is used to compare the performance of one manager to their peer group, which makes it simpler for investors to choose between the vast number of investment managers.
Broad Market Index
? A Market Index (benchmark) refers to a hypothetical portfolio of investments that represents a segment, asset or category of an investable market. Market Indices are used to benchmark managers performance, to assist their style reliability and ability to provide excess returns.
FUM
? Funds/Assets under management (AUM) is the total market value of the investments that a person or entity manages on behalf of clients. Assets under management definitions and formulas vary by company.
Management Fee
? A management fee is a charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise for selecting finanical products and managing the portfolio.
Performance Fee
? A performance fee is a payment made to an investment manager for generating positive returns. This is as opposed to a management fee, which is charged without regard to returns. A performance fee can be calculated many ways. Most common is as a percentage of investment profits, often both realized and unrealized. It is largely a feature of the hedge fund industry, where performance fees have made many hedge fund managers among the wealthiest people in the world.
Spread
? A spread can have several meanings in finance. Basically, however, they all refer to the difference between two prices, rates or yields. In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity. This is known as a bid-ask spread.
BlackRock Advantage Hedged Intl EquityBGL0109AUManaged FundsForeign EquityCurrency HedgedForeign Equity - Currency Hedged IndexDeveloped -World Index354.59 M0.53%0.00%0.36%

Performance Review

Fund Name Last Month
? Returns after fees in the most recent (last) month).
3 Months Return
? Returns after fees in the most recent 3 months.
1 Year Return
? Trailing 12 month returns.
3 Years Average Return
? Average Annual returns from the last 3 years.
Since Inc. Average Return
? Average (annualised) returns since inception
1 Year Std. Dev. (Annual)
? The standard deviation (or annual volatility) of the last 12 months.
3 Years Std. Dev. (Annual)
? The average standard deviation (or annual volatility) from the last 3 years.
Since Inc. Std. Dev. (Annual)
? The average standard deviation (or annual volatility) since the fund inception.
1 Year Max Drawdown
? The maximum drawdown in the last 12 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
3 Year Max Drawdown
? The maximum drawdown in the last 36 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Since Inc. Max Drawdown
? The maximum drawdown since inception - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
BlackRock Advantage Hedged Intl Equity1.13%3.05%30.4%9.38%10.33%10.68%15.75%14.32%-3.53%-24.36%-54.35%

Peer Comparison

Fund Name Peer Index Name
? A group of individuals who share similar characteristics and interests are called peer groups. Peer group analysis is an essential part of assessing a price for a particular stock in investment research. The emphasis here is on making a comparison, meaning that the peer group constituents should be more or less identical to the company being examined, especially in terms of their main business and market capitalization areas.
12 Months Excess Return
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
Excess Return Annualised Since Inception
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
12 Months Alpha
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over 12 months. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
Alpha Annualised Since Inception
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market annualized since inception. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
12 Months Beta
? Rolling 12Month Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
Beta Annualised Since Inception
? Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
12 Months Tracking Error
? 12Month Tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark over the last 12 months. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
Tracking Error Since Inception
? Since Inception tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark since inception. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
12 Months Correlation
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Correlation Since Inception
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
BlackRock Advantage Hedged Intl EquityForeign Equity - Currency Hedged Index4.71%0.23%NA%NA%NA%1.13.14%2.34%0.960.99

Product Details

Fund Name Verifed by SMSF Mates Manager Address Phone Website Email
BlackRock Advantage Hedged Intl EquityYesPO Box N43, Grosvenor Place, Sydney NSW 122002 9272 2200https://www.blackrock.com/auishares.australia@blackrock.com

Product Due Diligence

What is BlackRock Advantage Hedged Intl Equity

BlackRock Advantage Hedged Intl Equity is an Managed Funds investment product that is benchmarked against Developed -World Index and sits inside the Foreign Equity - Currency Hedged Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The BlackRock Advantage Hedged Intl Equity has Assets Under Management of 354.59 M with a management fee of 0.53%, a performance fee of 0.00% and a buy/sell spread fee of 0.36%.

How has the investment product performed recently?

The recent investment performance of the investment product shows that the BlackRock Advantage Hedged Intl Equity has returned 1.13% in the last month. The previous three years have returned 9.38% annualised and 14.32% each year since inception, which is when the BlackRock Advantage Hedged Intl Equity first started.

How is risk measured in this investment product?

There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since BlackRock Advantage Hedged Intl Equity first started, the Sharpe ratio is NA with an annualised volatility of 14.32%. The maximum drawdown of the investment product in the last 12 months is -3.53% and -54.35% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.

What is the relative performance of the investment product?

Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The BlackRock Advantage Hedged Intl Equity has a 12-month excess return when compared to the Foreign Equity - Currency Hedged Index of 4.71% and 0.23% since inception.

Does the investment product produce Alpha over its Peers?

Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. BlackRock Advantage Hedged Intl Equity has produced Alpha over the Foreign Equity - Currency Hedged Index of NA% in the last 12 months and NA% since inception.

What are similar investment products?

For a full list of investment products in the Foreign Equity - Currency Hedged Index category, you can click here for the Peer Investment Report.

What level of diversification will BlackRock Advantage Hedged Intl Equity provide?

BlackRock Advantage Hedged Intl Equity has a correlation coefficient of 0.99 and a beta of 1.1 when compared to the Foreign Equity - Currency Hedged Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.

How do I compare the investment product with its peers?

For a full quantitative report on BlackRock Advantage Hedged Intl Equity and its peer investments, you can click here for the Peer Investment Report.

How do I compare the BlackRock Advantage Hedged Intl Equity with the Developed -World Index?

For a full quantitative report on BlackRock Advantage Hedged Intl Equity compared to the Developed -World Index, you can click here.

Can I sort and compare the BlackRock Advantage Hedged Intl Equity to do my own analysis?

To sort and compare the BlackRock Advantage Hedged Intl Equity financial metrics, please refer to the table above.

Has the BlackRock Advantage Hedged Intl Equity been independently verified by SMSF Mate?

This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.

How can I invest in BlackRock Advantage Hedged Intl Equity?

If you or your self managed super fund would like to invest in the BlackRock Advantage Hedged Intl Equity please contact PO Box N43, Grosvenor Place, Sydney NSW 1220 via phone 02 9272 2200 or via email ishares.australia@blackrock.com.

How do I get in contact with the BlackRock Advantage Hedged Intl Equity?

If you would like to get in contact with the BlackRock Advantage Hedged Intl Equity manager, please call 02 9272 2200.

Comments from SMSF Mates

SMSF Mate does not receive commissions or kickbacks from the BlackRock Advantage Hedged Intl Equity. All data and commentary for this fund is provided free of charge for our readers general information.

Historical Performance Commentary

Performance Commentary - May 31, 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%.

In the US, the S&P 500 Index increased by 0.4% in May (in local currency terms), with the equity rally highly concentrated among a handful of mega-cap tech companies, notably Nvidia. Debt ceiling negotiations remained in focus throughout the month, with a deal agreed on the final weekend of May to suspend the country’s debt limit until 2025 and cap non-defense spending. The US economy also remains resilient, with the unemployment rate falling to 3.4% in April – reflecting a 50-year low. This has led to rising investor expectations of another interest rate hike by the US Federal Reserve (Fed), which increased its policy rate by 25 basis points over the month. Earlier in the month, First Republic Bank was acquired by J.P. Morgan and US regional banks remain under scrutiny.

European equities, as represented through the Euro Stoxx 50 Index, fell by 2.2% across the period (in local currency terms), with luxury goods producers reversing the previous month’s gains. Across the period, the Eurozone’s largest economy, Germany, officially entered a recession following a downward revision to Q1 economic data. Persistent higher prices have weighed on household spending and consumer confidence, with German headline inflation at 7.6% over April. Despite the growing economic damage, the European Central Bank (ECB) increased its benchmark interest rate by 25 basis points at the beginning of May.

Performance Commentary - April 30, 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%.

In the US, the S&P 500 Index increased by 1.6% in April (in local currency terms), with Communication Services and Real Estate sectors among the best performers. Core inflation data for March met expectations at 4.7% while the unemployment rate unexpectedly fell to 3.6%, reflecting ongoing tightness in the labour market. US regional banks have also come under renewed scrutiny after the troubles of First Republic Bank, which sold-off sharply after reporting a significant drop in deposits. The recent banking tumult has resulted in further tightening of credit conditions which is likely to drag on economic activity. Although corporate reporting season for Q1 has seen strong performance in terms of earnings surprises relative to analyst expectations, a year-on-year decline in corporate earnings is expected for a second straight quarter.

European equities, as represented through the Euro Stoxx 50 Index, increased by 1.6% across the period (in local currency terms), with luxury goods producers among the best performers. However, European economic activity remains challenged, with Q1 GDP growing a mere 0.1% from the previous quarter even as the energy shock faded. In April, European Central Bank (ECB) Executive Board Member, Isabel Schnabel, signaled more rate hikes ahead and noted concerns about strong underlying inflation and wages growth. Over the month, the German government also reached a pay deal with labor unions for 2.5 million public sector workers to receive a 5.5% pay rise.

Performance Commentary - March 31, 2023

The MSCI World Ex Australia Index gained 9.20% in unhedged AUD terms and 7.14% in fully hedged to AUD terms in Q1 2023.

Major asset classes performed strongly over the first quarter of 2023, despite significant turmoil within the financial sector. Global equities, as measured by the MSCI World Ex Australia Index, increased by 9.2% over Q1 in Australian dollar terms. Developed Markets outperformed their Emerging Market counterparts, with fears of broader contagion across the banking system easing late in March. However, investors remain alert for signs of any further financial cracks and economic damage following the collapse of Silicon Valley Bank and forced acquisition of Credit Suisse by UBS. Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index (hedged) saw meaningful volatility but gained 2.4% over the quarter.

In the US, the S&P 500 Index increased by 7.5% over the quarter and by 3.7% in March (in local currency terms). The Information Technology sector outperformed while Financials recorded losses as US regional banks sold off after the collapse of Silicon Valley Bank. Despite the recent banking stress, the US Federal Reserve (Fed) increased the Fed funds rate by 50 basis points over Q1 but introduced a new liquidity backstop to help banks meet depositor withdrawals. Fed Chair, Jerome Powell, also cautioned that the Fed was not contemplating any rate cuts later this year, contrary to market expectations for a policy pivot following the latest banking tumult. Meanwhile, core inflation rose less than forecast at 4.6% year-on-year in February, while key housing market indicators have also shown signs of slowdown.

European equity markets, as represented through the Euro Stoxx 50 Index, increased by 14.2% in the first quarter and by 2.0% in March (in local currency terms). The takeover of Credit Suisse by UBS took the spotlight, with Swiss regulators swiftly facilitating the acquisition given sustained capital flight by the bank’s depositors. Meanwhile, the European Central Bank’s (ECB) hiked twice by 50 basis points over Q1. Following the March rate decision, ECB President, Christine Lagarde, struck a hawkish tone by re-stating the priority of reining in inflation – having seen core Eurozone inflation reach an all-time high of 5.7% over February.

In the UK, the FTSE 100 Index gained by 3.6% over the quarter but lost 2.5% in March (in local currency terms). The Bank of England pushed up its policy rate to 4.25%, having hiked rates twice over the period. UK inflation remains stubbornly high, with February CPI data increasing unexpectedly to 10.4% on the back of rising food prices and energy bills. Britain experienced widespread worker strikes over Q1, with unions across a range of industries protesting pay and working conditions, amidst a tight UK labour market.

Asian equities recorded positive returns in Q1. China’s CSI 300 Index rose by 4.7% over the quarter but declined by 0.5% in March (in local currency terms), with gains earlier in the quarter underpinned by the country’s economic reopening. In March, the country set its new GDP growth target of “around 5%” for 2023, representing its lowest for more than three decades and below last year’s goal of 5.5%. China’s domestic restart continues apace with February data showing strong activity and credit growth, while official non-manufacturing PMI hit a 12-year high late in the quarter.

Performance Commentary - February 28, 2023

The MSCI World Ex Australia Index gained 2.09% in unhedged AUD terms and -1.63% in fully hedged to AUD terms in February 2023.

Following a strong start to the year, financial markets experienced more volatility in February as strong economic data drove a repricing higher in interest rates. Global equities, as measured by the MSCI World Index (hedged), declined by 1.6% over the month, while the unhedged index finished February up 2.1% as currency moves offset the decline in international share prices. Fixed Income markets, as represented by the Bloomberg Barclays Global Aggregate Index (hedged), recorded losses and closed the month down 1.8%.

In the US, the S&P 500 Index fell by 2.4% in February (in local currency terms), with Energy and Utilities sectors among the worst performers. Strong inflation prints again took centre stage over the month, as both headline and core inflation for January came in above expectations. In addition, the unemployment rate declined to a multi-decade low of 3.4% while US retail sales climbed to a two-year high. Signs that inflation is proving persistent and inconsistent with hopes for a quick return to the US Federal Reserve’s (Fed) target, along with strongerthan-expected economic data, saw the notion of any potential rate cuts in 2023 fade. The corporate reporting season for Q4 also showed evidence of weaker fundamentals, with less companies beating earnings forecasts and a smaller proportion of firms raising earnings guidance compared to the previous season.

European equities, as represented through the Euro Stoxx 50 Index, increased by 1.9% in February (in local currency terms). European assets have outperformed most major markets in recent months, despite core inflation increasing to 5.3% in January. Business activity continued to improve across the Eurozone with improvements in flash Purchasing Managers’ Index (PMI) readings. Over the month, the European Central Bank (ECB) hiked interest rates by 50 basis points to bring its policy rate to 2.50% and the Bundesbank President, Joachim Nagel, suggested the ECB may need to further tighten policy past its upcoming March meeting. Meanwhile, European corporate earnings disappointed with only four sectors recording positive earnings growth year-on-year.

In the UK, the FTSE 100 Index rose by 1.8% over February (in local currency terms). While UK inflation remains elevated, it dipped for the third month in a row to 10.1% in January which was below economist forecasts. Over the period, Prime Minister, Rishi Sunak struck a landmark deal with the European Union on post-Brexit trade rules for Northern Ireland to help resolve trade barriers and ease diplomatic tensions. Earlier in the month, the Bank of England (BOE) hiked rates by 50 basis points as expected but pushed back against future rate hikes.

Performance Commentary - December 31, 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.

In the US, the S&P 500 Index increased by 7.6% over the quarter but fell by 5.8% in December (in local currency terms), The initial rally in equities was underpinned by resilient corporate earnings and moderating inflation data, the latter of which bolstered investor hopes for a less aggressive monetary stance. The US Federal Reserve (Fed) slowed the pace of rate hikes by increasing the Fed funds rate by only 50bps in December (compared to 75bps in November). However, the Fed published a new set of interest rate projections which predicted the policy rate will rise to 5.1% by the end of 2023 – another significant revision upwards. A decline in goods prices saw two consecutive months of weaker CPI data, however services inflation remains stubbornly high. The US labour market remains tight, with average US hourly earnings rising by double the consensus forecast in November to reach a 5.1% annual rate.

European equity markets, as represented through the Euro Stoxx 50 Index, increased by 14.6% in the fourth quarter but declined by 4.3% in December (in local currency terms). Early signs that the European energy crisis may be abating and a possible peak in inflation helped stocks rally during the quarter. While Eurozone consumer prices rose by 10.1% in November, this was lower than markets had expected, given a noticeable drop in energy prices, and down from a record high in October. However, equities lost momentum after the European Central Bank’s (ECB) policy meeting in December, as investors baulked at the hawkish rhetoric by ECB President, Christine Lagarde, who signalled that future rate increases would be higher than expected and painted a bleak economic picture. The ECB also announced that quantitative tightening will begin in March 2023 to shrink the bond holdings on their balance sheet.

Performance Commentary - November 30, 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%.

In the US, the S&P 500 Index increased by 5.6% in November (in local currency terms), with Materials and Industrials sectors outperforming. US equities rallied when inflation data came in below consensus forecasts, with inflation rising 7.7% in October on an annual basis, compared to the 7.9% print predicted. Expectations that the US Federal Reserve (Fed) will moderate future rate increases on the back of softening inflation also helped markets trend higher.

However, various Fed speakers continued to emphasise that policy tightening still has further to go and the overall level of interest rates is more important than the pace of hikes. Meanwhile, the US midterm elections saw Republicans take control of the House of
Representatives, while the US unemployment rate also rose to 3.7% with the labour market seeing early signs of cooling.

European equity markets, as represented through the Euro Stoxx 50 Index, increased by 9.7% in November (in local currency terms), despite lackluster economic data and weak consumer sentiment.
The initial negative market reaction to a missile landing in Poland was quickly unwound when it became apparent this was an unintended accident by Ukraine’s air defense systems. Purchasing Managers’
Index (PMI) data showed that activity in the European services sector shrank in October – an indication of the growing economic damage from central bank tightening. This tradeoff was also acknowledged in previous European Central Bank (ECB) meeting minutes.

The UK equity market gained 7.1% in November (in local currency terms). As expected, the Bank of England (BoE) raised rates by 75bps, representing its biggest single hike since 1989. Investors also digested the UK government’s anticipated budget statement, which cut spending and raised taxes. This stabilizes the British budget on a new lower level of economic activity, however most of the austerity measures will come beyond the next scheduled election in early 2025.
Headline UK inflation hit a new four-decade high and pushed above 11% per annum on the back of higher energy and food prices.

Asian equities were also positive over the month. China’s CSI 300
Index rose by 9.8% in November (in local currency terms) after falling sharply in previous months. Market sentiment was buoyed by the incremental relaxation of China’s zero-COVID policy. The easing of pandemic controls came amidst widespread anti-lockdown protests across multiple Chinese cities following a recent flare up in COVID-19 cases and accompanying social restrictions. These demonstrations mark one of the largest acts of civil unrest in over a decade and led to a reassessment of pandemic controls to placate public demands.
Earlier in the month, Chinese authorities rolled out several measures to support the property market and ease the liquidity crunch faced by developers.

Performance Commentary - October 31, 2022

The MSCI World Ex Australia Index gained 7.81% in unhedged AUD terms and 7.22% in fully hedged to AUD terms in October 2022.

October saw a reprieve for risk assets, with the European energy crisis showing signs of easing and investors speculating there could soon be a potential dovish pivot by central banks. Global equities rallied over the month and the MSCI World Index rose by +7.8% in Australian dollar terms, with Developed Markets outperforming their Emerging Market counterparts. Fixed Income markets saw varied performance, with global bonds closing the month down -0.4% while Australian bonds posted positive returns of +0.9%. Riskier parts of the fixed income market also recorded positive performance given the improvement in risk appetite and tightening of credit spreads.

In the US, the S&P 500 Index increased by +8.1% in October (in local currency terms). US equities were boosted by a resilient corporate earnings season for Q3, with more than two-thirds of companies that have reported results delivering a positive earnings surprise. That said, the magnitude of positive earnings surprise is notably below the 5-year and 10-year average figure – signalling slowing demand across the economy. Energy and Industrials sectors outperformed over the period, while several large-cap tech names, including Meta and Amazon, disappointed. US GDP growth was stronger than expected and bounced back in Q3 to 2.6% annualized, driven largely by higher energy exports. Core PCE, the US Federal Reserve’s (Fed) preferred inflation measure, also accelerated slightly to 5.1% on annual basis over the month. Core inflation remains stubbornly high given strong wages growth and is not far from the 40-year high reached earlier this year.

European equity markets, as represented through the Euro Stoxx 50 Index, increased by +9.1% in October (in local currency terms). The European Central Bank (ECB) announced another 75bps rate hike in October, however ECB President, Christine Lagarde, took a dovish tone by signaling a slower pace of rate hikes ahead. European energy concerns also diminished over the period, with natural gas prices falling given Europe’s success in building up supply ahead of winter. Country inflation data across Germany, France and Italy, which was released late in the month, beat analyst estimates and remains at elevated levels.

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