Fund Performance for December 2006
Welcome to the monthly update on your Fund's investment performance.
ARIA's primary responsibility is the management and investment of the CSS 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.CSS default Fund
Table 1: The CSS in 2006-07 as at end December 2006 (%)
Asset Class as at end December 2006 |
Allocation as at end December 2006 |
Fund Return |
Benchmark Return |
|---|---|---|---|
Australian shares |
32 |
12.4 |
13.2 |
International shares |
22 |
13.6 |
13.9 |
Long/Short equities |
5 |
7.2 |
9.3 |
Property |
14 |
3.8 |
7.9 |
International Bonds |
11 |
3.1 |
4.7 |
Market Neutral strategies |
10 |
5.1 |
4.8 |
Cash |
6 |
3.2 |
3.1 |
Total Fund |
100 |
7.6 |
9.8 |
The return numbers in the table above are after fees and before tax, except for the Total Fund return number, which is after both fees and taxes. Benchmark return 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.Table 2: Historical Fund Returns over the last five years (% p.a.)
Year |
Return |
|---|---|
2001-02 |
-5.6 |
2002-03 |
3.0 |
2003-04 |
13.9 |
2004-05 |
13.9 |
2005-06 |
13.3 |
Commentary:
Global equity markets yet again recorded strong gains in December, continuing a trend that has been evident since the brief market correction of May 2006. Equity market performance since mid-2006 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 the month of December, equity markets advanced strongly despite a sell-off in fixed interest markets. This reflected an intensification of real or perceived takeover activity. In the first half of this financial year, Australian equity market returns matched those of its global counterparts, despite a pullback in resource shares. However, a strong rise in the Australian Dollar during this period meant that investors in unhedged global equities experienced returns below those from Australian equities.
Global fixed interest markets recorded negative returns in December, reflecting a rise in long-term bond yields of around 0.2%-0.3% in most countries. The increase in bond yields was due largely to improved economic growth data in the US and Europe, which suggested that short-term interest rates would be raised further in Europe and may not decline, as was expected earlier, in the US. In the first six months of this financial year, Australian bonds underperformed their global counterparts by more than 2%. This meant that while the return from Australian bonds fell short of the return from cash, the opposite was true for global bonds. This financial year has also been notable for a solid rise in the Australian Dollar against both the US Dollar and Japanese Yen, which eroded some of the gains from unhedged overseas investments. However, this did not impact the Fund's returns as all overseas investments are hedged into the Australian dollar.
The Fund's after tax and fees return for the six months ending December was 7.6%. While strong in an absolute sense, the return was below benchmark, due to underperformance from a number of our active managers.CSS Cash Investment Option
Table 3: The CSS Cash Investment Option in 2006/2007 as at end December 2006 (%)
The Fund return in the table below is after fees and tax, whereas the Benchmark return is before fees and tax.
Fund Return 6 Months to end December 2006 |
Benchmark Return 6 Months to end December 2006 |
|---|---|
2.6 |
3.1 |
Table 4: Historical Fund Returns (%)
Year |
Return |
|---|---|
2004-05 (7 months to 30 June 2005) |
2.7 |
2005-06 |
4.9 |
Commentary:
The Cash investment option continues to deliver returns in line with the benchmark return once account is taken of fees and taxes.
Steve Gibbs
CEO
31 January 2006
