Investment update for August 2014

Strong data offset by geopolitical risks

Global context

While events in Ukraine and Iraq/Syria again dominated the headlines in August, risk assets performed reasonably well on the back of positive economic data from the US. US GDP for June was surprising on the upside, housing data was strong, consumer confidence continued strengthening and manufacturing sentiment was positive. US Federal Reserve Chair Janet Yellen continues to flag that US rates may rise sooner rather than later, following the Reserve’s recent tapering of its quantitative easing program.

International markets

The MSCI World ex-Australia Index (hedged into AUD) increased 3.0% over the month. The Australian Dollar appreciated against most major currencies, which resulted in a lower return of 1.7% (in AUD) on an unhedged basis. The strongest performing developed markets in local currency terms were the US, Ireland, the Netherlands and Belgium. Emerging markets performed in line with developed markets on an unhedged basis. From a global sector perspective, the defensive sectors of Consumer Staples and Health Care were the strongest performers while Materials and Telecommunications lagged the most.

Australian markets

The S&P/ASX300 Accumulation Index (0.6%) underperformed hedged overseas equities due to positive investor sentiment towards the US. Corporates appear keen to appease investor demand for yield with a major focus by companies on how they can return capital to shareholders. Small Caps significantly outperformed large caps. The performance of small Industrials drove All Industrials to outperform All Resources. Telecommunications, Health Care and Energy were the best performing sectors. Materials was the weakest performing sector while Consumer Staples and IT also lagged.

Global bonds

With the exception of the Japanese, most developed market Government bond yields tightened over the month. The upward pressure that strong economic data tend to place on rates was more than offset by geopolitical risks, which tends to promote ‘safe-haven’ bonds. Long duration bonds and Inflation-linked securities had a stellar month. Australian bonds underperformed global bonds (hedged into AUD) while global investment grade credit marginally underperformed global government bonds.

Broad stock market performance – August 2014

Performance (income and capital gain or loss) %
August 3 months
Australian Shares (S&P/ASX 300 Accumulation) 0.6 3.6
International Shares (MSCI AC World ex-Aust) hedged 2.9 3.9
 Unlisted property (Mercer Unlisted Property Funds Index (Pre-tax))* 0.5 2.4
Global Bonds (Barclays Global Aggregate (Hedged)) 1.4 2.4
Cash (UBS Bank Bills) 0.2 0.7
Check out AvSuper’s weekly returns and quarterly performance results Please note that past performance is not always a reliable indicator of future performance.

*Estimate as at 9 September 2014 Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays

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.

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