PSSap Fund Performance for March 2007

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 March 2007 (% )

This table below shows the actual asset allocations of the four pre-mixed investment options at the end of March 2007. The other seven options are essentially single strategy options - see our product disclosure statement .

  
Table 2: Performance in 2006-07 as at end March 2007 (%)  

The figures in the following table are after tax 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 nine months of the current financial year until the end of March 2007.

Commentary:

Despite increased volatility, equity markets strengthened again in March. Australian equities rose by a very impressive 3.3%, buoyed by large gains in information technology, telecom, resource and energy stocks. International equities rose by 1.5% in hedged terms, but a rise in the Australian dollar meant that the return to unhedged investors was minus 0.8%. In March, the strongest gains were achieved in Asia ex Japan (up 5%) and Europe (up 4%). The US rose by 1%, but Japan fell by 2%.  Financial year to date performance by major equity markets remains very strong. During this period, the Australian market rose by 22%, compared with 16% from hedged international equities. However, a strong rise in the Australian dollar eroded the returns from unhedged international equities to just 6%. The strongest gains in the 9 months ending March were achieved by Germany and Hong Kong (both up by 22%). The US and Japan rose by just under 12%, while the UK advanced by 8%.

Global bond yields rose again in March, reflecting increased concerns over higher inflation, a less optimistic outlook for short-term interest rates and a reversal of investor risk aversion that was evident towards the end of February.  As a result, both Australian bonds (down 0.3%) and international bonds (flat) underperformed the return from cash (up 0.5%).  In the 9 months to the end of March, Australian bonds (up 3.7%) underperformed cash (up 4.7%). However, international bonds (up 6.2%) fared better.  The Australian dollar rose again in March, reaffirming the trend evident in the earlier part of this financial year. The rise in our currency has not impacted diversified investment option returns as all overseas investments are hedged into the Australian dollar.

Option returns in the first nine months of this financial year remain very strong, with investors rewarded for taking risk.  Options with a heavy equity emphasis, particularly Australian equities, achieved the highest returns. A rise in the value of the Australian Dollar eroded the returns from unhedged international equities.  The Bonds/fixed interest option has suffered from subdued returns in global fixed interest markets.

Steve Gibbs
CEO
30 April 2007