CSS fund performance for June 2009

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.

Table 1: The CSS default fund earning rate as at end June 2009 (%)
CSS default fund earning rate for 1 month to end June 2009 0.320

 

Table 2: Monthly Allocated Earning Rates (%)
July 2008
%
Aug 2008
%
Sept 2008
%
Oct 2008
%
Nov 2008
%
Dec 2008
%
Jan 2009
%
Feb 2009
%
Mar 2009
%
April 2009
%
May 2009
%
June 2009
%

-0.649

1.434

-5.115

-7.683

-2.967

0.546

-3.882

-1.977

3.568

1.605

0.093

0.320

 

Table 3: Historical fund information (%)
Year
Fund rates (%) #
2003-04
13.9
2004-05
13.9
2005-06
13.1
2006-07 *
13.7
2007-08 *
-1.6

# All rates are after fees and tax.

*The 2006-07 rate is the annualised rate of return for the period 1 July 2003 to 30 June 2007, which was allocated to member accounts as of 1 July 2007. Prior year rates are performance rates. Members who exited during the period 1 July 2003 to 30 June 2007 were paid the exit rate applicable on the day of exit being their share of the fund earnings for the relevant period. The 2007-08 rate is the performance of the default option which reflects the monthly allocated earning rates for the 12 months ending 30 June 2008.

Commentary

Fundamentals

The global economy ended the 2008/09 financial year in a very uncertain fashion. Leading indicators have been pointing to a recovery in manufacturing, and this is beginning to materialize with an encouraging lift in US forward orders and Asian manufacturing output. At the same time, the rate of job losses in the US eased to 345,000 in May, compared with an average of over 600,000 jobs per month over the previous six months. Improving business confidence has helped to drive this result, however in comparison the recovery in consumer confidence remains tentative.

Domestically, recent economic releases have been stronger than expected, on balance. Consumer spending has been particularly robust, fuelled by government stimulus payments, lower interest repayments and improving confidence. Vehicle sales have also picked up recently, in response to government tax incentives. And lead indicators of housing market activity suggest a recovery in construction will build through late-2009 and into 2010. In contrast, business investment intentions have been scaled back, which is accordant with low rates of bank lending growth to the corporate sector.

Financial market performance in June

Global equity markets presented a mixed performance in June. The strongest performers were concentrated in Asia, with the Japanese Nikkei rallying 5% and the Australian and Chinese markets up 3.5%. The Taiwanese market was a notable exception, falling almost 7%. The S&P500 was unchanged over the month, while European equity markets declined between 2 and 3% on average.

Consistent with the uncertain path of the global economy, government interest rates were unchanged in the US and Germany, while Australian bond yields fell slightly. Credit markets also underperformed on increased risk aversion in corporate lending markets. Movements in foreign exchange markets were subdued over the month.

Table 4: The CSS cash option earning rate as at end June 2009(%)
CSS cash investment option fund earning rate for 1 month to end June 2009 0.228

 

Table 5: Monthly allocated earning rates (%)
July 2008
%
Aug 2008
%
Sep 2008
%
Oct 2008
%
Nov 2008
%
Dec 2008
%
Jan 2009
%
Feb 2009
%
Mar 2009
%
April 2009
%
May 2009
%
June 2009
%

0.565

0.532

0.526

0.599

0.434

0.370

0.337

0.247

0.233

0.217

0.189

0.228

 

Table 6: Historical fund earning rates since inception (%)
Year
Earning rate #
2004-05 (7 months to June )
2.8
2005-06
4.8
2006-07
5.4
2007-08
6.1

# All earning rates are after fees and tax

The cash investment option continues to deliver returns in line with its objectives, once account is taken of fees and taxes.

Alison Tarditi
Chief Investment Officer
24 July 2009