Fund Performance for May 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 May 2006 (% )
This table shows the actual asset allocations of the four pre-mixed investment options at the end of May 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 |
33 |
12 |
8 |
2 |
Bonds/Fixed interest |
37 |
28 |
13 |
0 |
Market neutral strategies |
0 |
10 |
10 |
8 |
Total Defensive Assets |
70 |
50 |
31 |
10 |
Australian shares |
15 |
18 |
29 |
39 |
International shares |
12 |
17 |
25 |
36 |
Property |
3 |
10 |
10 |
10 |
Long/Short equities |
0 |
5 |
5 |
5 |
Total Growth Assets |
30 |
50 |
69 |
90 |
Total |
100 |
100 |
100 |
100 |
Table 2: Performance in 2005-06 as at end May 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.
Investment Option |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
Jan |
Feb |
Mar |
Apr |
May |
Financial Year to End-May |
Conservative |
0.8 |
0.7 |
1.3 |
-0.5 |
1.5 |
1.1 |
1.0 |
0.5 |
1.3 |
0.2 |
-0.9 |
7.2 |
Balanced (50/50) |
1.2 |
0.7 |
1.8 |
-0.5 |
1.9 |
1.3 |
1.6 |
0.5 |
1.6 |
0.4 |
-1.2 |
9.7 |
Trustee Choice |
2.3 |
1.2 |
2.7 |
-1.1 |
2.7 |
1.6 |
2.4 |
0.4 |
2.2 |
0.7 |
-2.1 |
13.6 |
Aggressive |
2.4 |
0.7 |
3.7 |
-1.9 |
3.6 |
1.9 |
3.0 |
0.2 |
2.8 |
1.0 |
-2.9 |
15.2 |
Cash |
0.4 |
0.4 |
0.4 |
0.4 |
0.4 |
0.4 |
0.4 |
0.3 |
0.4 |
0.3 |
0.4 |
4.2 |
Bonds/Fixed interest |
-0.1 |
0.7 |
-0.2 |
-0.1 |
0.4 |
0.8 |
-0.2 |
0.9 |
0.4 |
-0.7 |
0.1 |
1.9 |
Australian shares |
2.5 |
1.9 |
5.0 |
-3.3 |
4.3 |
2.5 |
3.7 |
0.2 |
4.5 |
2.2 |
-3.8 |
21.1 |
International shares (unhedged) |
3.5 |
1.0 |
1.4 |
-0.3 |
4.3 |
3.3 |
1.7 |
1.4 |
5.5 |
-2.3 |
-3.0 |
17.4 |
International shares (hedged) |
3.4 |
-0.2 |
3.5 |
-1.6 |
4.3 |
2.5 |
3.5 |
0.4 |
2.4 |
0.9 |
-4.3 |
15.5 |
Property |
0.4 |
-0.1 |
0.8 |
2.1 |
1.0 |
0.5 |
2.2 |
0.5 |
1.4 |
0.9 |
1.0 |
11.2 |
Sustainable |
-0.1 |
-0.1 |
4.1 |
-3.1 |
3.3 |
2.3 |
3.8 |
1.5 |
4.6 |
1.8 |
-2.8 |
16.2 |
Commentary:
May was a watershed month for financial markets. Fears of a rise in US inflation, together with signs of a slowdown in US economic growth led to a significant rise in investor risk aversion. This resulted in a sharp decline in commodity prices and a significant sell-off in equity markets. The Australian share market declined by 4.7% in May, with the Utilities, Health Care and Telecoms sectors all declining by over 8%. International equity markets also fell sharply in May, with the MSCI (ex Aust) Index declining by 4.4% in hedged terms. A fall in the Australian dollar limited the sell-off in the MSCI (ex Aust) Index in unhedged terms to 2.7%.
In the eleven months to the end of May, the Australian share market rose by 21.5%, despite the sell-off in May. The Materials sector led the way (thanks to strong commodity price gains), rising by just under 50%, while the Energy sector advanced by 32% (reflecting strong oil prices). During this period, the MSCI (ex Aust) Index rose by 14.5% in hedged terms and 18.2% in unhedged terms, highlighting a decline in the Australian Dollar. In terms of countries, Japan rose by 34%, Germany by 24%, the UK by 12% and the US by just 6.5%.
US short-term interest rates were increased by 0.25% to 5.0% in early May, the 16th rate increase since mid-2004. Fixed interest markets performed in line with cash during May, but continued to lag the return from cash in the eleven months to the end of May.
Absolute performance of the four pre-mixed options in the eleven months to May was strong, 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 eleven months to the end of May was strong in international equities and property, but less successful in alternative investments within Australian equities.
Andre Morony
Chief Investment Officer
27 June 2006
