PSSap fund performance for June 2009

Welcome to the monthly update on your fund's investment performance.

ARIA’s primary responsibility is the management and investment of the PSSap funds in the equitable and best interests of all members. ARIA approaches this task by setting an investment objective to maximise the real returns earned on investments subject to a tolerable level of short-term volatility.

Table 1: PSSap option earning rates for periods ending June 2009
Option Earning rate *
  1 month (%)
Trustee choice 0.32
Conservative 0.73
Balanced 0.72
Aggressive 0.74
Cash 0.22
Government bonds 0.80
Australian shares 4.26
International shares (Unhedged) -1.49
International shares -0.76
Property -1.60
Sustainable 3.29

* All earning rates are after fees and tax

Table 2: Historical fund earning rates (%)
Option 2005/06 2006/07 2007/08
Trustee choice 14.3 16.5 -2.0
Conservative 7.7 9.1 0.8
Balanced 10.2 12.2 0.6
Aggressive 16.1 20.0 -5.2
Cash 4.6 5.2 5.9
Government bonds 2.0 3.0 2.8
Australian shares 22.3 25.8 -14.5
International shares (unhedged) 17.8 11.4 -13.9
International shares 15.5 21.5 -9.7
Property 11.7 17.7 13.1
Sustainable 19.0 24.2 -12.1

* All earning rates are after fees and tax

Commentary

Fundamentals

The global economy ended the 2008/09 financial year in a very uncertain fashion. Leading indicators have been pointing to a recovery in manufacturing, and this is beginning to materialise with an encouraging lift in US forward orders and asian manufacturing output. At the same time, the rate of job losses in the US eased to 345,000 in May, compared with an average of over 600,000 jobs per month over the previous six months. Improving business confidence has helped to drive this result, however in comparison the recovery in consumer confidence remains tentative.

Domestically, recent economic releases have been stronger than expected, on balance. Consumer spending has been particularly robust, fuelled by government stimulus payments, lower interest repayments and improving confidence. Vehicle sales have also picked up recently, in response to government tax incentives. And lead indicators of housing market activity suggest a recovery in construction will build through late-2009 and into 2010. In contrast, business investment intentions have been scaled back, which is accordant with low rates of bank lending growth to the corporate sector.

Financial market performance in June

Global equity markets presented a mixed performance in June. The strongest performers were concentrated in Asia, with the Japanese Nikkei rallying 5% and the Australian and Chinese markets up 3.5%. The Taiwanese market was a notable exception, falling almost 7%. The S&P500 was unchanged over the month, while European equity markets declined between 2 and 3% on average.

Consistent with the uncertain path of the global economy, government interest rates were unchanged in the US and Germany, while Australian bond yields fell slightly. Credit markets also underperformed on increased risk aversion in corporate lending markets. Movements in foreign exchange markets were subdued over the month.

Alison Tarditi
Chief Investment Officer
3 June 2009