Fund Performance for March 2006

Welcome to the monthly update on your Fund's investment portfolios.

The PSS Board's primary responsibility is the management and investment of the Fund in the equitable and best interests of all members. The Board 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 2006 (% )

This table shows the actual asset allocations of the four pre-mixed investment options at the end of March 2006. The other seven options are essentially single strategy options - see our product disclosure statement .

Table 2: Performance in 2005-06 as at end March 2006 (%)  

The figures in the table are after fees and taxes and show the return for a member who was invested for the whole month in each option.

Commentary:

Global equity markets resumed their strong upward path in March after they paused for breath in February. The MSCI World (ex Australia ) index advanced by 2.4% in local currency terms in March, reflecting strong gains in Japan (up 5.3%), UK (up 3.9%) and Germany (up 3.0%). The US market advanced by a more modest 1.2%. The Australian equity market experienced a very strong month, rising by 4.7% in response to further large gains in materials and energy stocks. In the nine months to the end of March, global equities rose by 18.7% in local currency terms. The largest advances were achieved by Japan (up 47%), Germany (up 30%), Switzerland (up 28%) and UK (up 22%). By way of contrast, the US market rose by only 10%. During the same period, the Australian market rose by 24%, buoyed by very strong gains within the Materials (up 51%), Energy (up 33%) and Healthcare (up 32%) sectors.

Economic releases during March indicated that growth in the US remained robust, while it continued to accelerate in Europe and Japan . This led to heightened fears that global short-term interest rates would be raised further. In response, global fixed interest markets declined, reflecting a rise in bond yields. In the nine months to the end of March, the Australian bond market outperformed its global counterparts, reflecting a smaller increase in local bond yields. However, during this period, both Australian (up 3.4%) and global (up 1.0%) bond markets recorded returns below those from cash (up 4.3%).

Absolute performance of the four pre-mixed options in the nine months to March was positive, with the largest gains achieved by the options with the greatest exposure to equities. The return from Bonds / Fixed Interest, while low, was well within the expected range of outcomes for this option. Asset class performance relative to benchmark in the nine months to the end of March was strong in international equities and property, but less successful in alternative investments within Australian equities.

Andre Morony
Chief Investment Officer
2 May 2006