PSSap Fund Performance for November 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 November 2006 (% )

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

Table 2: Performance in 2006-07 as at end November 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 five months of the current financial year until the end of November 2006.

Commentary:

Global equity markets again recorded solid gains in November, continuing the trend evident in the first four months of this financial year. Equity market performance in recent months 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 November, equity markets were further buoyed by a decline in US inflation and an associated reduction in bond yields. Australian equity market returns have exceeded those of its global counterparts this financial year, despite a pullback in resource shares. This has largely been due to heightened takeover activity, particularly amongst private equity groups.

Global fixed interest markets continued to strengthen in November, reflecting a further decline in bond yields. This was due largely to a moderation in both US economic growth and core inflation. In the first five months of this financial year, US 10 year bond yields declined by around 0.7%. This ensured that bond market returns comfortably exceeded those from cash, albeit falling short of those recorded by equity markets. The Australian bond market also strengthened in November, although to a lesser extent than its global counterparts. In the first five months of this financial year, Australian 10 year bond yields declined by 0.2%, during a period in which domestic short term interest rates rose modestly. This financial year has also been notable for a rise in the Australian dollar. This has eroded some of the gains from unhedged overseas investments.

Option returns in the first five months of this financial year have been very strong, with investors rewarded for taking risk. The property option achieved the highest return, buoyed by strong upward revaluations for a number of properties. Options with a heavy equity emphasis also achieved strong returns, although a rise in the value of the Australian Dollar eroded the returns from unhedged international equities. The cash option recorded the lowest return.

Steve Gibbs
CEO
21 December 2006