PSS Fund Performance for July 2006
Welcome to the monthly update on your Fund's investment performance.
The impact of investment performance on your final benefit varies from minimal if you are a contributing member to significant if you are a preserved benefit member or if you have transferred amounts from other funds. However, all members may find it useful to understand how your fund performs.
The PSS Board's primary responsibility is the management and investment of the PSS Fund in the equitable and best interests of all members. The Board 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.
PSS default Fund
Table 1: Asset allocation as at end July 2006 (%)
| Asset Class | Allocation |
|---|---|
| Australian shares | 30 |
| International shares | 23 |
| Long/Short equities | 5 |
| Property | 12 |
| Sustainable | 1 |
| Total Growth Assets | 71 |
| Australian Bonds | 0 |
| International Bonds | 13 |
| Market Neutral | 10 |
| Cash | 6 |
| Total Defensive Assets | 29 |
| TOTAL | 100 |
Table 2: The PSS in 2005-06 as at end July 2006 (%)
The return numbers in the table below are after fees and before tax, except for the Total Fund return number which is after both fees and taxes. Benchmark numbers are before fees and taxes.
The asset class sector benchmark return numbers show the market performance of the sector while the fund return numbers show what your Fund's performance was in that sector. Thus, for example, the benchmark return number for Australian equities in July (-2.1%) is the performance of the Australian stock market index (ex Listed Property Trusts), while the fund return number (-2.4%) is what your Fund's holdings of listed Australian equities returned.
| Asset Class |
Fund Return 1 Month to end July 2006 |
Benchmark Return 1 Month to end July 2006 |
|---|---|---|
| Listed Australian shares | -2.4 | -2.1 |
| Listed International shares | -0.1 | 0.8 |
| Long/Short equities | 0.0 | 0.8 |
| Property | -0.7 | 0.4 |
| International Bonds | 0.9 | 1.2 |
| Market Neutral | 0.3 | 0.8 |
| Cash | 0.5 | 0.5 |
| Total Fund | -0.5 | -0.2 |
Table 3: Historical Fund Returns over the last 6 years (% p.a.)
| Year | Return |
|---|---|
| 2000-2001 | 1.4 |
| 2001-2002 | -5.7 |
| 2002-2003 | 2.9 |
| 2003-2004 | 14.2 |
| 2004-2005 | 13.9 |
| 2005-2006 | 13.1 * |
* Unaudited
Commentary:
Equity markets rose only modestly in July, with the best gains achieved in parts of Europe, particularly Switzerland up 3.8% and the Netherlands up 2.9%. The US market rose by 0.6% and the UK by 1.3%. Going against this trend, the Japanese market fell by 0.9% and the Australian market (ex LPTs) declined by 2.1%. Heightened conflict in the Middle East and signs of a slowdown in the US economy constrained global equity market returns, while higher than expected inflation figures in Australia helped to push the domestic market lower. This was compounded by weakness in Material stocks, due to disappointing production reports from Rio Tinto and BHP. Investor focus moved to defensive stocks, with Utilities the best performing sector.
Global fixed interest markets achieved strong gains in July as evidence of an easing in the US economy increased the likelihood that the long episode of short-term interest rate increases in the US was near an end. By way of contrast, the Australian fixed income market rose by only 0.1%, due to strong inflation numbers and expectations of further rises in short-term interest rates. The latter influence helped the Australian Dollar rise by over 3% against the US Dollar, Yen and Euro.
The Fund's active managers generally struggled in the month of July, with below benchmark performance recorded in international equities, property and market neutral funds. The Australian equity sector achieved an above benchmark return once account is taken of the sector's strongly performing alternative investments.
The after-tax return for the Fund of -0.5% in July was below the benchmark return of -0.2%. In July, the pre tax return for the Fund was also -0.5%. Performance relative to benchmark suffered from the underperformance by a majority of the Fund's active managers.PSS Cash Investment Option
Table 4: The PSS Cash Investment Option in 2006/07 as at end July 2006 (%)
| Fund Return 1 Month to end July 2006 |
Benchmark Return 1 Month to end July 2006 |
|---|---|
| 0.4 | 0.5 |
Table 5: Historical Fund Return (%)
The Fund return in the table below is after fees and tax.
| Year | Return |
|---|---|
| 2004-2005 (7 months to June) | 2.8* |
| 2005-2006 | 4.8* |
Commentary:
The Cash Investment Option continues to deliver returns in line with the benchmark return once account is taken of fees and taxes.
Andre Morony
CIO
29 August 2006
