Investment update

10/08/2011

Information provided by Funds SA 9 August 2011.


The following information provides a brief update on recent market movements.

Recent Market Volatility

Volatility in global share markets has increased materially in recent weeks. Concerns over the strength of the global economy together with the US and European governments' handling of sovereign debt levels, has negatively affected investor confidence.

The recent Standard and Poor's downgrade of US sovereign debt from AAA to AA+, although not a material downgrade, provided a catalyst for markets to become even more volatile.

Market returns for the 2011-12 financial year to date (1 July 2011 to 8 August 2011 inclusive) are shown in the table below.

Australian shares

-13.4%

Global shares

-15.0%

Australian listed property

-13.6%

High yielding debt assets*:

  • Global corporate debt

3.0%

  • Global high yield

-1.9%

  • Emerging market debt

1.1%

Australian government bonds

3.6%

Australian inflation linked bonds

4.7%

Cash

0.5%

*Note exposures to high yielding debt assets are held within the 'Diversified Strategies Income' asset class and comprise between 8% and 15% of the investment option allocations (with the exception of the Cash option).

Australian share markets have fallen by around 13% since the beginning of the new financial year with commodities and the local currency also down. Offsetting these losses has been strong performance in most government bond markets, with US government bonds performing well despite the downgrade.

Although these short term moves in share markets are painful to members in isolation, it does highlight the benefits of diversification as fixed interest allocations have served to partially offset share market losses.

Portfolio positioning

What are we doing to navigate this difficult environment?

  • From an asset allocation perspective, exposure to the fixed interest asset class within each of the investment options has offset some of the volatility. The relatively large allocation to inflation linked bonds across the options has also served to play a similar diversifying role as this market has performed very well.
  • Cash allocations remain a key component enabling portfolio stability and flexibility.
  • With respect to offshore share markets, the exposure to offshore currency has acted as a diversifier, with falls in the Australian dollar benefiting the options.
  • Within the fixed interest asset class, exposure to peripheral European government bonds is near zero.

We continue to monitor and analyse risks and potential opportunities in a disciplined manner with the aim of delivering investment returns in a risk focused manner.

Your investment choices

Your exposure to market volatility is dependent on your selected investment option. It is important to be comfortable with the level of risk your super is exposed to and be satisfied that your selection suits your investment timeframe.

More than ever, it is important to make sure your investment option accords with your personal financial objectives.

The information within this paper has been prepared in good faith by Funds SA.  However: Funds SA does not warrant the accuracy of the information and to the extent permitted by law, disclaims responsibility for any loss or damage of any nature whatsoever which may be suffered by any person directly or indirectly through relying upon it whether that loss or damage is caused by any fault or negligence of Funds SA or otherwise.  The information is not intended to constitute advice and persons should seek professional advice before relying on the information. 
 

SA Metropolitan Fire Service Superannuation Pty Ltd ACN 068 821 750 as Trustee for the SA Metropolitan Fire Service Superannuation Scheme ABN 99 439 309 855.

This website is provided by Mercer Outsourcing (Australia) Pty Ltd (MOAPL) ABN 83 068 908 912, Australian Financial Services Licence #411980. The Trustee pays a fee for the provision of this service, however this fee is not conditional on you using this service or acting on the information or advice provided through this service.