Investment markets have been quite strong over recent months.
Equity markets have been buoyed by apparent progress on the Greek debt issue (although it is clear that there will be many more twists and turns before the situation in Greece is truly stabilised, and that many other countries face budgetary difficulties and severely constrained growth prospects), by actions of the European Central Bank to ease liquidity pressures facing banks, and signs of strengthening of economic activity in the US. The US equity market has risen by 11.6% since the start of January and by a very impressive 27.6% since its low in early-October 2011. The Australian market has also risen, although to a lesser extent (up 6.8% year to date and 9.7% since October 2011) with the strength of the Australian dollar being a major retarding factor.
The better tone of markets in recent months is a very welcome change from the tumultuous conditions through much of the second and third quarters of 2011 during which equity markets in many countries including Australia fell by more than 20%. Although we don’t focus on investment performance for periods as short as nine months, the net result is that Catholic Super’s Balanced option has recorded a modestly positive return for the financial year to date (up approximately 1.9%). This return is below what we seek to deliver on average over a 5 to 7 year period. Nevertheless, it is well above what members may have been expecting (fearing) at the end of September when they were being bombarded on a daily basis with new stories talking of scores of billions of dollars being lost on sharemarkets. In fact, the lowest level to which the unit price of our Balanced Option fell through this period represented a drop of just 4% from 1 July 2011 – disappointing and worrying but hopefully not disastrous, especially given the 11.4% increase over the 2010/2011 year.
More than four years have now passed since the onset of the global financial crisis (GFC).
It is clear however, that working out the imbalances which built up in the global economic and financial systems through the years prior to the GFC will take a further considerable period. There are no “quick fixes”.
In this environment, our approach at Catholic Super can be summarised as: