Investment update December 2011
10 February 2012
The rollercoaster ride in global share markets has continued unabated in the new financial year, following a similarly volatile time in 2010/11. This extreme volatility in investment markets is a direct reflection of investor concerns over the scale of the Eurozone sovereign debt crisis and accompanying economic problems.
In spite of the current difficult investment market conditions TWUSUPER investment performance, through its range of quality investment managers, continues to track well against its competitors.
How we compare
Over the 12 months to 31 December 2011, returns for our Balanced investment option are above the median (the mid-point return) of over 150 surveyed super funds reported in the Selecting Super survey*.
Over 3 years our Balanced option returns are top quartile (in the top 25% of funds) and over 5 years returns are above median.
Our Equity Plus investment option performance is just below median over 12 months and above median over 3 years and 5 years.
Our Cash Plus investment option performance is in the top 25% of surveyed super funds over 1, 3 and 5 years.
Rolling investment performance to 31 December 2011
| 1 year |
3 years |
5 years |
| -4.6% |
5.2% |
-1.7% |
| -4.4% |
5.1% |
-2.0% |
| -0.9% |
6.2% |
0.5% |
| -2.4% |
5.1% |
-0.5% |
| 4.5% |
5.9% |
5.2% |
| 4.2% |
3.8% |
4.6% |
Past performance is not a guarantee of future returns
*Source: Selecting Super performance tables at 31 December 2011.
Your investment
In times of market volatility it’s natural to feel anxious about periods of negative returns, but it’s important to be aware that volatility is a feature of investment cycles. Volatility does not change the long term nature of these investments.
Try not to overreact to short term movements in the investment market. You could lock in investment loss and miss out on growth opportunities as the markets rebound.
2011/12 Market update at December
The early part of this financial year saw global equity markets falling between 10% and 20% from their levels of April 2011, and frequently experiencing unusually large daily moves of between 1% and 3%. Equity investors were trading aggressively, not on the basis of fundamental earnings or asset values, but on the basis of the latest political developments in the Eurozone. It was very much a speculative time in share markets.
However, there has been a strong recovery generally in markets in the December quarter. This is in spite of further credit rating downgrades for most of the member countries in the Eurozone and their banks, and the lack of a resolution to the region’s economic woes.
The only major share market not to participate in the rally was Japan which fell 4%. In contrast, the USA led the way with a rise of nearly 12% for the quarter as investors were buoyed by stronger-than-expected economic data and signs of a recovery in the US employment market.
Regardless of whether investors were risk averse or not, “safe-haven” assets such as US, German and Australian bonds have been keenly sought this financial year, driving bond yields to historic lows.
We have even had the extraordinary situation of investors being prepared to buy short term German bonds at a negative rate of interest, i.e. investors are paying for the privilege of the German government minding their money! Normally, investors expect to receive more than they lend, but when the interest rate is negative, investors agree to be paid less.
As we move into 2012, further positive news on the US economy and renewed hopes of an end to the European debt crisis have pushed share markets higher. However, for these gains not to dissipate quickly we will need to see decisive action in the Eurozone, and soon.