PSS Fund Performance for September 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.
ARIA's primary responsibility is the management and investment of the PSS Fund in the equitable and best interests of all members. ARIA 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 September 2006 (%)
| Asset Class | Asset Allocation |
|---|---|
| Australian shares | 33 |
| International shares | 23 |
| Long/Short equities | 5 |
| Property | 12 |
| Total Growth Assets | 73 |
| Bonds | 12 |
| Market Neutral | 10 |
| Cash | 5 |
| Total Defensive Assets | 27 |
| TOTAL | 100 |
Table 2: The PSS in 2006-07 as at end September 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.
| Asset Class 3 Months to end September 2006 |
Fund Return 3 Months to end September 2006 |
Benchmark Return |
|---|---|---|
| Listed Australian shares | 1.6 | 2.1 |
| Listed International shares | 4.9 | 5.5 |
| Long/Short equities | 1.6 | 4.0 |
| Property | 0.3 | 3.9 |
| Bonds | 2.1 | 3.6 |
| Market Neutral | 1.8 | 2.4 |
| Cash | 1.6 | 1.5 |
| Total Fund | 2.0 | 3.4 |
Table 3: Historical Fund Returns over the last 5 years (% p.a.)
| Year | Return |
|---|---|
| 2001-02 | -5.7 |
| 2002-03 | 2.9 |
| 2003-04 | 14.2 |
| 2004-05 | 13.9 |
| 2005-06 | 13.1* |
* unaudited
Commentary:
Global equity markets continued to advance in the month of September, culminating in strong returns for the September quarter. Markets in the September quarter were buoyed by a perceived peaking in US interest rates, a sharp decline in the oil price, continued strong corporate profits growth and heightened takeover activity. The Australian equity market also rose in the September quarter, but at a more moderate pace than its global counterparts. This was due to a decline in the price of resource shares, which were constrained by a fall in commodity prices.
Global fixed interest markets also benefited from the perceived peaking in US interest rates. US 10 year bond yields declined by 0.5% in the September quarter, thereby fuelling strong capital gains and impressive bond market returns. The US gains were repeated in other global bond markets, with the correlation between markets at very high levels.
The after-tax return for the September quarter was 2.0%. While strong in an absolute sense, the return was below benchmark, due to underperformance from a majority of our active managers.
PSS Cash Investment Option
Table 4: The PSS Cash Investment Option in 2006/2007 as at end September 2006 (%)
| Fund Return 3 Months to end September 2006 |
Benchmark Return 3 Months to end September 2006 |
|---|---|
| 1.3 | 1.5 |
Table 5: Historical Fund Returns (%)
| Year | Return |
|---|---|
| 2004-05 (7 months to June) | 2.8 |
| 2005-06 | 4.8* |
*unaudited
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
26 October 2006
