Fund Performance for October 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 October 2006 (%)
Asset Class as at end September 2006 |
Allocation 4 Months to end October 2006 |
Fund Return 4 Months to end October 2006 |
Benchmark Return |
|---|---|---|---|
Australian shares |
31 |
6.7 |
7.4 |
International shares |
22 |
7.9 |
9.0 |
Long/Short equities |
5 |
3.3 |
6.0 |
Property |
14 |
2.2 |
4.4 |
Bonds |
11 |
2.7 |
4.2 |
Market Neutral strategies |
10 |
3.7 |
3.2 |
Cash |
6 |
2.1 |
2.0 |
Total Fund |
100 |
4.4 |
6.1 |
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 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* |
* unaudited
Commentary:
Global equity markets rose strongly in the month of October, following impressive gains in the September quarter. In the four months ending October, equity market performance benefited from a healthy risk appetite amongst investors and a perception that the US economy would experience an orderly reduction in the pace of economic growth, thus eradicating the need for further short-term interest rate increases. Additional impetus was provided by a sharp decline in the oil price, continued strong corporate profit growth and heightened takeover activity. The Australian equity market also rose strongly in the four months to the end of October, due to robust corporate profit growth and an increase in takeover activity.
In the first four months of this financial year, global fixed interest markets benefited from a perceived peak in US short-term interest rates. This resulted in US 10 year bond yields declining by a little over 0.5%, thus fuelling capital gains which resulted in bond market returns comfortably exceeding those from cash, albeit below those recorded by equity markets. By way of contrast, the Australian bond market achieved returns below cash in the four months to the end of October. The more subdued domestic bond environment reflected a pick-up in inflationary pressures and associated increases in short-term interest rates.
The Fund's after tax and fees return for the four months ending October was 4.4%. While strong in an absolute sense, the return was below benchmark, due to underperformance from a majority of our active managers.
CSS Cash Investment Option
Table 3: The CSS Cash Investment Option in 2006/2007 as at end October 2006 (%)
The Fund return in the table below is after fees and tax, whereas the Benchmark return is before fees and tax.
Fund Return |
Benchmark Return |
|---|---|
1.7 |
2.0 |
Table 4: Historical Fund Returns (%)
Year |
Return |
|---|---|
2004-05 (7 months to 30 June 2005) |
2.7 |
2005-06 |
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.
Steve Gibbs
CEO
23 November 2006
