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 July 2006 (%)
Asset Class
Allocation as at end July 2006
Fund Return 1 Month to end July 2006
Benchmark Return
1 Month to end July 2006
Australian shares
32
-1.7
2.1
International shares
23
0.0
0.8
Long/Short equities
5
0.5
0.8
Property
14
-0.2
0.4
International Bonds
14
0.9
1.2
Market Neutral strategies
10
0.3
0.8
Cash
2
0.4
0.5
Total Fund
100
-0.4
-0.1
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 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. For example, the Benchmark return for Australian equities in the month of July (-2.1%) is the performance of the Australian stock market index (excluding listed property trusts), while the Fund return number (-1.7%) is what your Fund's holdings of Australian equities returned.
Table 2: Historical Fund Returns over the last 6 years (% p.a.)
Year
Return
2000-01
1.8
2001-2002
-5.6
2002-2003
3.0
2003-2004
13.9
2004-2005
13.9
2005-2006
13.3*
* 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, reflecting strong performance from the sector's alternative investments.
The after-tax return for the Fund of -0.4% in July was below the benchmark return of -0.1%. In July, the pre tax return for the Fund was also -0.4%. Performance relative to benchmark suffered from the underperformance by a majority of the Fund's active managers.
CSS Cash Investment Option
Table 3: The CSS Cash Investment Option in 2006/2007 as at end July 2006 (%)
The Fund return in the table below is after fees and tax, whereas the Benchmark return is before fees and tax.
Fund Return 1 Month
to end July 2006
Benchmark Return 1 Month
to end July 2006
0.4
0.5
Table 4: Historical Fund Returns (%)
Year
Return
2004-2005 (7 months to 30 June 2005)
2.7*
2005-2006
4.9*
*unaudited
Commentary:
The Cash Investment Option continues to deliver returns in line with the benchmark return once account is taken of fees and taxes.
