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How investment performance affects your benefit

Over the financial year to 30 June 2010, the CSS Default Fund rose by 9.3%. For the year as a whole, the fund's return was buoyed by strong gains in Australian and global equity markets.

After a very negative 2008/09, financial markets rebounded strongly in the first nine months of the 2009/10 financial year. Some of these gains were given back in the June quarter, due to fears that economic growth in a number of large developed nations would be hurt by the huge sovereign debt build-up in some of the smaller European nations, such as Greece.

How investment performance affects your benefit

For contributing members
As a contributing member, the member and/or productivity components of your benefit are affected by investment earnings. However, if you leave as an age retiree, your Consumer Price Index (CPI)-indexed pension – generally the most significant part of your benefit – is not affected by investment performance, because it’s determined by your final salary for super purposes, length of membership and age at exit.

For deferred members
As a deferred benefit member, the member and/or productivity components of your benefit are affected by investment earnings, as is the starting value of your Consumer Price Index (CPI)-indexed pension, which is calculated and payable when you claim your entitlement.
 

2009/10 CSS Performance

CSS performance – period ending 30 June 2010

Remember past performance is no indication of future performance.

Default Fund
Over the financial year to 30 June 2010, the CSS Default Fund rose by 9.3%. For the year as a whole, the fund’s return was buoyed by strong gains in Australian and global equity markets. Investment grade credit, government bonds and market neutral funds also performed strongly and helped boost the fund’s returns. This reflected a robust bounce back in domestic and international equity market prices as well as strong outperformance of the index benchmarks by our active managers in Australian shares, International shares, investment-grade credit, hedge funds and our high-quality core unlisted property portfolio.

Over the past seven years, the Default Fund has returned 6.3% per annum. This performance places the CSS well above the median super fund returns for one, three and five years.

The peer group ranking is measured against the standard SuperRatings Balanced Options Index Universe of 50 superannuation funds in Australia.

Cash Investment Option
Over the financial year to 30 June 2010, the CSS Cash Investment Option returned 3.2%. This performance was in line with the option investment objective and reflected the prevailing level of short term market interest rates. Longer term performance has been somewhat higher and again is in line with its investment objective.

Switching investments
Take some time to understand the investment options we offer and the impact switching investment options may have on your final benefit.

We recommend you visit www.css.gov.au and read the Cash Investment Option fact sheet before you decide to switch investment options.
 

Market report for 2009/10

The aftermath of the global debt crisis has involved a transfer of debt from the private sector (households and the financial sector) to the balance sheets of many developed-world governments. This has resulted in a differentiation between those countries able to service that debt (for example core Europe and the US) and those less able (for example peripheral European countries, such as Greece). It has also reinforced the increasing dependence of global growth on the emerging regions, most prominently China.

Financial markets rebounded in the first nine months of the 2009/10 financial year, as policy initiatives stabilised global economic growth and the financial system, which reduced the risk of depression. Over the financial year to 30 June 2010, the Australian listed equity market rose around 13.1%, after its 20% decline in 2008/09. Global equity markets rose by 11.5% (compared to the previous year, when they fell a little more than our domestic index).

However, a rise in the value of the Australian dollar eroded some of these offshore gains for investors who did not hedge their foreign currency exposure. Commodity markets also performed strongly over the period, achieving double-digit returns. Metals rose by around 20%, with copper prices rising by almost 30%. The price of gold rose by 35%, as it is generally perceived to be a hedge against deflation risk and/or a collapse in fiat currencies. Oil prices, by comparison, increased by a more modest 8%.

A lack of global inflationary pressures and stimulatory monetary policy created a generally favourable environment for government bonds. The Australian Dollar moved broadly in line with the equity markets, rising in the first nine months of the year before declining in the June quarter. For the year as a whole, the Australian dollar rose by 20% against a weak Euro and 5% against a stronger US dollar.

The volatility of financial market price movements remains elevated, reflecting a generally higher level of uncertainty about the outlook. Investors remain sensitive to economic growth news, which is unusually dependent on the success of policy and the less-transparent emerging economies. They are also responsive to any news that indicates the potential impact of structural factors (for example sovereign debt burdens) on the inflation outlook.