Quarterly Investment Commentary - March 2013

Quarterly Investment Commentary - March 2013

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ESSSuper’s investment option performance

The March quarter was once again positive for investors with all of ESSSuper’s Accumulation Plan, Income Streams and Beneficiary Account options over both the quarter and also the year achieving positive returns.

Given the strength in the markets, investment options with more exposure to growth assets (i.e. both Domestic and International Equities, and Alternatives - such as Infrastructure) outperformed those that are more defensively positioned.

Our relative performance against peers for both the short term and longer term continues to be strong (in terms of SuperRatings surveys). We achieved a better return than that of the median manager for four of the seven investment options over the 12 month period (including a top quartile ranking for the Shares Only option). Given the approach to diversify away from equities, our performance relative to peers slipped (our peers generally holding more equities), but we are pleased to have still generated strong relative and absolute performance.

The table below illustrates the performance against our peers for the Accumulation Plan and Beneficiary Account’s investment options for the 1, 3, 5 and 10 years to 31 March 2013.

ESSSuper's Accumulation Plan & Beneficiary Account comparative investment performance

Investment Option	1 Year	3 Year	5 Year	10 Year
Shares Only	5 of 55	3 of 53	13 of 49	5 of 29
High Growth*	28 of 55	2 of 53	-	-
Growth	44 of 79	3 of 75	3 of 69	10 of 40
Balanced*	97 of 108	12 of 101	9 of 90	-
Conservative*	65 of 94	37 of 90	23 of 81	-
Defensive*	10 of 34
Cash*	33 of 74	41 of 73	-	-

 

*  This option has not been in existence for the whole 10 years, so results are shown for the relevant periods only.

It’s important to remember that super is a long term investment and periods of volatility can be expected to occur from time to time. History shows that it generally pays to stay focused on your long term goals, even in retirement.

How we achieve this

Our investment options are devised with capital protection in mind, and we were pleased that in the strong quarter that our Equity Managers managed to keep pace with markets – our exposures to Specialist Credit, Investment Grade Credit, Infrastructure, Structured Beta and Property all generating positive returns and contributing to the strong results across all investment options. We continue to monitor world markets and maintain our structured approach to risk management. We have maintained a disciplined approach to rebalancing and cash flow management; our approach to diversification continues.

We’re here to help. If you have any questions call our Member Service Centre on 1300 650 161.

What influenced our performance?

Globally

The March quarter again delivered strong positive returns to equity investors as the world’s central bankers continued with their expansionary policies. The underlying US economy remains positive with many companies releasing stronger than expected earnings results buoying the share markets. Europe enjoyed stronger share markets over the quarter, but weakened in the last weeks as the impacts of the Cyprus bank bailout and slower core market economic growth were compounded by a failure to elect a government in Italy. In our region, Chinese authorities continue to attempt to slow a speculative property bubble by increasing taxes. This, combined with a slowdown in exports, weighed on commodity prices (which weakened over the quarter).

In terms of markets, the MSCI World (Hedged) rose by 9.8% driven by the Nikkei (Japan – continued support from a stimulus package and a weakening currency) up 19.3%, Germany up 2.4%, France up 2.5%, UK up 8.7% and US (Dow Jones) up by 11.3%.  

Here at home
The Australian Dollar strengthened against all currencies as offshore investors continued to invest in the higher rates on offer in one of the few remaining triple A rated countries.

The Reserve Bank of Australia left interest rates on hold, preferring to see if international events negatively impact on us, giving them room to move if required.  Government Bonds continue to remain attractive to both international investors and central banks, seeking the relatively high interest rates on offer.

The forecast over the medium term

Looking ahead, stock markets remain attractively priced (in both absolute and relative terms) with corporate balance sheets healthy and earnings generally robust. Risks however still remain – with retailers and exporters suffering. For the Australian economy, the non mining states continue to struggle with below trend economic growth and the issues surrounding job losses in the manufacturing sector. Consumer confidence and commodity prices are starting to trend downwards as well, impacting government forward estimates in terms of revenue. The US remains on track to deliver positive growth, but Europe and China seem to be struggling.

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