This commentary is a summary of key events during the month with a focus on those events and forecasts that may impact on AvSuper's investment returns.

November 2011 Investment Update

Unfortunately, November squashed any positive sentiment from October as equity markets struggled and October's strong gains were lost. The US Budget Deficit Super Committee could not reach a consensus on deficit reduction measures which triggered automatic budget cuts form 2013. The Eurozone continues searching for a policy response sufficient to calm nervous markets. China's manufacturing data took its sharpest fall since March 2009, causing commodity prices to generally tumble.

Australian equities finished the month down, affected by the same issues as markets around the world. In a period where negative sentiment drove markets, defensive stocks generally outperformed and cyclicals performed poorly. Energy, Materials, Consumer Discretionary and Financials underperformed while Industrials, Health Care, IT, Telecoms and Utilities performed best. Small companies marginally underperformed large caps due to the under performance of small Resources stock relative to small Industrials. Unlisted Property posted a positive return for the month with returns largely reflecting income.

Global equities performed poorly on a hedged basis, and with the $A weakening significantly against the $US, unhedged returns (in $A) were positive for the month. Emerging markets underperformed Global equities on an unhedged bass. There was a wide performance disparity between countries in local currency terms. Austria, Spain, Greece and Portugal were weak, whilst Germany, Ireland, Switzerland, Sweden, Norway, UK and the US were the stand out performers on a relative basis.

Globally, defensive sectors such as Consumer Staples, Health Care, Telecoms and Utilities posted strong returns in a risk averse environment. Energy and Industrials did well, but other cyclical sectors such as Materials and Consumer Discretionary performed poorly. Financials struggled on the back of renewed concerns about the US’s ability to reach a policy consensus in relation to the US fiscal position, the European debt crisis, and concerns about exposures to the European sovereign crisis.

During November, the RBA announced a rate cut and Australian 5 and 10 year bond yields tightened considerably. Longer term Australian Government inflation linked bonds were the standout performer for the month. Bond yield for the Eurozone marginally softened in aggregate reflecting investor concerns about some Euro countries' fiscal viability. US 10-year bonds were relatively flat while UK 10-year bonds tightened slightly. The Barclay's Global Credit Index gave global credit a weaker month's results. The 10-year yields of Australian, Euro area, UK and US government bonds remain low.

Looking ahead

Investment markets surged towards the end of November in response to major central banks (including the European Central Bank, Federal Reserve, Bank of England, Bank of Canada, Bank of Japan and the Swiss National Bank), agreed to coordinated action to ease the increasing strains on the global financial system by lowering the cost of the existing liquidity swap rates by 0.50%. China cut its reserve rate requirement by 0.50%, the first move in three years, and US jobs data surprised on the upside.

Investment markets are expected to remain volatile for the time being as market sentiment proves to be closely aligned to political and policy announcements.

We trust you find this information useful in understanding how your AvSuper investment is performing and welcome your feedback on how we can improve the information we provide to you. You can also refer to last month's commentary.

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This update prepared for AvSuper members incorporating market commentary kindly provided by JANA, AvSuper's professional investment advisers.