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FUNDS M A N AG E M E NT SE RVICE QUARTERLY INVESTMENT REPORT 30 September 2015 Quarterly Investment Report, 30 September 2015 Produced by P U B LI C TR U S TE E GPO Box 1338 Adelaide South Australia 5001 T 08 8226 9200 | F 08 8226 9350 Country freecall 1800 673 119 www.publictrustee.sa.gov.au Quarterly Investment Report, 30 September 2015 This Quarterly Investment Report presents the results of the Public Trustee’s Funds Management Service performance and commentary for the quarter ended 30 September 2015. Public Trustee is a statutory entity founded in 1881. At the end of the September 2015 quarter, it had approximately $902m in funds under management. Public Trustee’s Funds Management Service has a distinguished record of high quality, proven and consistent investment performance. We are proud of our long-standing reputation for trust and reliability, and the vital role we play for our customers and their financial affairs. Investment markets were volatile during the September quarter. Concerns around China’s growth led to a correction in global share markets. Pleasingly, all of Public Trustee’s investment strategies comfortably exceeded benchmark returns for the September quarter 2015 and continue to do so over 1, 3 and 5 year periods. SIS Performance versus Benchmark to 30 September 2015 Cash benchmark variance Last 3 months 0.55% 0.29% 0.26% Last 12 months 2.52% 1.46% 1.06% Capital Stable benchmark variance -0.05% -0.46% 0.41% Balanced benchmark variance Performance 3 years 5 years 3.08% 1.73% 1.35% 3.90% 2.51% 1.39% 3.92% 3.44% 0.48% 5.81% 5.02% 0.79% 5.94% 5.26% 0.68% -0.63% -1.65% 1.02% 5.16% 4.35% 0.81% 8.66% 7.79% 0.87% 7.91% 7.17% 0.74% Growth benchmark variance -1.38% -3.03% 1.65% 5.61% 4.01% 1.60% 10.76% 9.64% 1.12% 9.07% 7.95% 1.12% Equities benchmark variance -2.86% -5.39% 2.53% 5.91% 2.99% 2.92% 13.84% 12.50% 1.34% 10.28% 8.74% 1.54% *After fees In the context of strong 3 and 5 year returns for share markets some volatility is not unexpected. As always we are focused on the long term and in delivering sound returns to our customers. If you would like to add to your portfolio, you may do so at any time. Please contact Elaine Pringle (08) 8226 1746 for more information. Debra Contala Public Trustee 6 November 2015 Quarterly Investment Report, 30 September 2015 Market Overview Global Sharp falls in the Chinese share market and concerns about their economy led to a sell-off in global shares during the quarter. In Europe, signs that a recovery might be on its way remain patchy despite stimulus from the European Central Bank. The bright spot in the global economy is the US, with recent data showing continued positive signs. Consumer spending and the housing market have held up relatively well despite the softening of the global economy and uncertainties in China. Australia The Reserve Bank of Australia (RBA) kept official interest rates on hold at 2.00%. The Australian Dollar fell against all major currencies during the September quarter, finishing at $0.70US. On the 15 September, Malcolm Turnbull was sworn in as the new Prime Minister of Australia. Share Markets Australian shares (ASX 300) fell by 6.5% over the quarter, due largely to a poor month in August. Global share markets were also volatile, however on an unhedged basis they were up 0.4% due to the fall in the Australian dollar. Key Developments Key developments over the quarter were: Outperformance from benchmark for all of Public Trustee’s investment strategies; Depreciation of the Australian dollar against all major currencies, and; Concerns around China’s economy. Since 1990, funds invested through Public Trustee Common Funds have grown from $160 million to $902 million today. Quarterly Investment Report, 30 September 2015 Cash Investment Strategy The Reserve Bank kept official interest rates on hold during the quarter at 2.00%. The fund’s return of 0.55% for the quarter was above the benchmark return by 0.26%. The strategies 3 and 5 year returns remain at 3.08% and 3.90%, which are 1.35% and 1.39% respectively ahead of benchmark. Crediting Rate: The investment return for this fund is calculated daily, based on the net earnings of the fund. The average crediting rate for the quarter was 2.20%, and the daily rate at 30 September 2015 was 2.10%. Fund size: $345 million. Objective: Funds assigned to the cash investment strategy are invested in the Public Trustee's Cash Common Fund. The objective of the Cash Common Fund is the preservation of capital. The strategy is intended for investors who are seeking secure returns at prevailing short term interest rates. Capital Stable Investment Strategy The strategy’s return for the quarter was -0.05%, outperforming the benchmark return by 0.41%. The strategy’s 3 year and 5 year returns of 5.81% and 5.94% are 0.79% and 0.68% respectively ahead of benchmark. Overseas Fxd Int 10.2% Quarter % 1 year % 3 year %* 5 year%** Return (after fees) -0.05% 3.92% 5.81% 5.94% Benchmark** -0.46% 3.44% 5.02% 5.26% 0.41% 0.48% 0.79% 0.68% Difference Australian Overseas Shares Shares 11.0% 9.2% Short Term Fxd Int 29.6% Fund size: $73 million. Performance Cash 19.8% *Annualised **Index return on Strategic Asset Allocation Objective: The objective of this strategy is to achieve a higher return than cash by strategically allocating 25% of the funds in growth assets and the balance in fixed interest and cash. This strategy is suitable for investors who are seeking higher returns than cash over time and are prepared to accept a slight increase in risk in terms of downward movements in the value of their capital from time to time. Property 5.1% Long Term Fxd Int 15.1% Quarterly Investment Report, 30 September 2015 Balanced Investment Strategy The strategy’s return for the quarter was -0.63%, outperforming the benchmark return by 1.02%. The strategy’s 3 year and 5 year returns of 8.66% and 7.91% are 0.87% and 0.74% respectively ahead of benchmark. Short Term Fxd Int 9.8% Fund size: $204 million. Long Term Fxd Int 25.0% Performance Overseas Cash Fxd Int 4.9% 10.2% Overseas Shares 18.2% Property 10.1% Quarter % 1 year % 3 year %* 5 year%** Return (after fees) -0.63% 5.16% 8.66% 7.91% Benchmark** -1.65% 4.35% 7.79% 7.17% 1.02% 0.81% 0.87% 0.74% Difference Australian Shares 21.8% *Annualised **Index return on Strategic Asset Allocation Objective: The objective of this strategy is to gain a higher return by strategically allocating 50% of the funds in growth assets and the balance in fixed interest and cash. This strategy is suitable for medium term investors who seek higher returns and are prepared to accept some volatility in the value of the funds invested. Growth Investment Strategy The strategy’s return for the quarter was -1.38%. This outperformed the benchmark by 1.65%. The strategy’s 3 year and 5 year returns remain at 10.76% and 9.07%, which are both 1.12% ahead of benchmark. Overseas Cash Fxd Int 4.8% 5.1% Term Fxd Int 15.0% Property 10.0% Fund size: $204 million. Performance Short Term Fxd Int Long 4.9% Overseas Shares 28.4% Quarter % 1 year % 3 year %* 5 year%** Return (after fees) -1.38% 5.61% 10.76% 9.07% Benchmark** -3.03% 4.01% 9.64% 7.95% 1.65% 1.60% 1.12% 1.12% Difference Australian Shares 31.8% *Annualised **Index return on Strategic Asset Allocation Objective: The objective of this strategy is to attain high long term returns in excess of inflation. It has a 70% strategic allocation to growth assets and the balance in fixed interest and cash. This strategy is suitable for long term investors who are prepared to accept high volatility in the value of the funds invested. Quarterly Investment Report, 30 September 2015 Equities Investment Strategy Australian Shares 49.4% The strategy’s return for the quarter was -2.86%, which outperformed the benchmark by 2.53%. The strategy’s 3 year and 5 year returns remain at 13.84% and 10.28%, which are 1.34% and 1.54% respectively ahead of benchmark. Overseas Shares 50.6% Fund size: $77 million. Performance Quarter % 1 year % 3 year %* 5 year%** Return (after fees) -2.86% 5.91% 13.84% 10.28% Benchmark** -5.39% 2.99% 12.50% 8.74% 2.53% 2.92% 1.34% 1.54% Difference *Annualised ** Index return on Strategic Asset Allocation Objective: The equities strategy offers 100% exposure to the world’s share markets. Over the long term, it offers the prospects of high returns but with the likelihood that capital values will fluctuate broadly in line with the fortunes of the share markets. Typically, this strategy may be used as a return booster in conjunction with one of the other investment strategies. The objective of this strategy is to gain exposure to both domestic and overseas share markets. This strategy has a 55/45 strategic allocation to the two markets respectively. NB: All the above investment strategies are exercised through investment in one, or a combination of, the Public Trustee Common Funds. The investment returns presented in this quarterly report relate to past performances and must not be taken to imply that this predicts future returns of the funds. The information and opinions contained in this report have been compiled or are arrived at by Public Trustee from sources believe to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness or correctness. The information in this report is of a general nature. Public Trustee strongly recommends that you contact the Office to discuss your particular circumstances. Public Trustee does not accept any liability whatsoever for any direct or consequential loss arising from any usage of information herein contained. PUBLIC TRUSTEE GPO Box 1338 Adelaide South Australia 5001 T 08 8226 9200 | F 08 8226 9350 Country freecall 1800 673 119 | www. publictrustee.sa.gov.au