PSSap Fund Performance for December 2006
Welcome to the monthly update on your Fund's investment portfolios.
ARIA’s primary responsibility is the management and investment of the Fund in the equitable and best interests of all members. ARIA approaches this task by setting investment objectives for the Fund's investment options that maximise the real investment returns earned subject to tolerable levels of short-term volatility for each option.Table 1: Asset allocations for pre-mixed investment options as at end December 2006 (% )
This table below shows the actual asset allocations of the four pre-mixed investment options at the end of December 2006. The other seven options are essentially single strategy options - see our product disclosure statement .
Asset Class |
Conservative |
Balanced 50/50 |
Trustee Choice |
Aggressive |
Cash |
25 |
7 |
7 |
2 |
Bonds/Fixed interest |
43 |
32 |
11 |
0 |
Market neutral strategies |
0 |
10 |
10 |
8 |
Total Defensive Assets |
68 |
49 |
28 |
10 |
Australian shares |
17 |
19 |
32 |
42 |
International shares |
11 |
15 |
23 |
31 |
Property |
4 |
12 |
12 |
12 |
Long/Short equities |
0 |
5 |
5 |
5 |
Total Growth Assets |
32 |
51 |
72 |
90 |
Total |
100 |
100 |
100 |
100 |
Table 2: Performance in 2006-07 as at end December 2006 (%)
The figures in the table are after taxes and fees. The first column shows performance for the 12 months ending June 2006. The second column shows the return for each option for a member who was invested for the whole six months of the current financial year until the end of December 2006.
Investment Option |
Financial Year 2005-06 |
6 Months to end December 2006 |
Conservative |
7.7 |
5.0 |
Balanced (50/50) |
10.2 |
6.4 |
Trustee Choice |
14.3 |
8.3 |
Aggressive |
16.1 |
10.0 |
Cash |
4.6 |
2.5 |
Bonds/Fixed interest |
2.0 |
2.5 |
Australian shares |
22.3 |
11.6 |
International shares (unhedged) |
17.8 |
7.7 |
International shares (hedged) |
15.4 |
11.8 |
Property |
11.7 |
9.6 |
Sustainable |
19.0 |
10.7 |
Commentary:
Global equity markets yet again recorded strong gains in December, continuing a trend that has been evident since the brief market correction of May 2006. Equity market performance since mid-2006 has benefited from robust investor risk appetite, expectations that US short term interest rates have peaked, a decline in the oil price, continued strong corporate profit growth and heightened takeover activity. In the month of December, equity markets advanced strongly despite a sell-off in fixed interest markets. This reflected an intensification of real or perceived takeover activity. In the first half of this financial year, Australian equity market returns matched those of its global counterparts, despite a pullback in resource shares. However, a strong rise in the Australian Dollar during this period meant that investors in unhedged global equities experienced returns below those from Australian equities.
Global fixed interest markets recorded negative returns in December, reflecting a rise in long-term bond yields of around 0.2%-0.3% in most countries. The increase in bond yields was due largely to improved economic growth data in the US and Europe, which suggested that short-term interest rates would be raised further in Europe and may not decline, as was expected earlier, in the US. In the first six months of this financial year, Australian bonds underperformed their global counterparts by more than 2%. This meant that while the return from Australian bonds fell short of the return from cash, the opposite was true for global bonds. This financial year has also been notable for a solid rise in the Australian Dollar against both the US Dollar and Japanese Yen, which eroded some of the gains from unhedged overseas investments. However, this did not impact the return of the diversified options, including Trustee Choice, as all overseas investments are hedged into the Australian dollar.
Option returns in the first six months of this financial year have been very strong, with investors rewarded for taking risk. Options with a heavy equity emphasis achieved the highest returns, although a rise in the value of the Australian Dollar eroded the returns from unhedged international equities. The Bonds/fixed interest and cash options recorded the lowest returns.
Steve Gibbs
CEO
31 January 2006
