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CIO's catch-up

Welcome to the fourth edition of Review - the PSSap quarterly investment report.

As we approach the end of financial year, general interest in investment performance grows. You can keep an eye out for our special edition of Review in early July which will outline PSSap investment performance for 2009/10 and wrap up market performance for the year.

Your investment options

Keep in mind that we offer a range of investment options to suit your goals and risk tolerance, but if you don’t choose an investment option, your money will be invested in our default option called Trustee choice.

You can switch your investment strategy at any time by logging onto Your account.

Chief Investment Officer

PSSap option performance – period ending March 2010

Investment markets have been supported by the policy-driven recovery in economic activity, which has expanded from its lead in emerging Asia, and is now gathering some momentum across the advanced economies.

PSSap investment performance
The default option, Trustee choice returned 2.5% over the past three months to 31 March 2010, while the one-year performance was 15.0%. Other balanced options also performed well, while the international shares option was the best performing in the quarter.

PSSap March quarter financial market and performance report
Investment markets have been supported by the policy-driven recovery in economic activity, which has expanded from its lead in emerging Asia, and is now gathering some momentum across the advanced economies.

Despite this, the strength of economic recovery remains highly differentiated, with deeply-indebted governments and households and recuperating banking sector balance sheets across Europe, the US and Japan containing the growth of private demand. Countries like Iceland, Greece, and, to a lesser extent, Portugal and Spain provide extreme examples of these dynamics. Meanwhile, economies with better fundamentals, including Asia and Australia, have delivered more resilient growth.

The divergence in economic performance raises challenges for policymakers as they consider setting a time-line for normalisation of interest rates (Australia has already started this process), and, in due course, for reducing budget deficits. In particular, extended periods of very low interest rates in the developed world create the risk of bubbles in high-growth economies, and/or financial asset prices. This increases the risk of poor long-term returns on that capital and could also increase asset market and economic volatility.

Despite these issues, the combination of fiscal policy stimulus, low interest rates and economic recovery underpinned a rally in credit and equity markets over the March quarter. For the three months to 31 March, Australian and International developed equity markets rose 1.3% and 5.5%, respectively.

Both nominal and inflation-linked government bonds also produced solid returns in the quarter as bond yields remained low. The Australian dollar appreciated by more than 8% against the Euro and the British Pound, and by 2.9% on a trade-weighted basis.