Investment update May 2015

Japanese shares and Australian listed property boosted our returns in a strong quarter

Returns were high for most investment markets during the quarter and the value of the REI Trustee Super Balanced option, which is the Fund’s default investment option, increased by 6.03% over the three months to the end of March. Over the 12 months to that date, the Trustee Super Balanced option returned 14.30% and over 5 years, an average of 8.75% per annum.

This is ahead of the long term average returns of most investments and comfortably ahead of the investment objective of the Trustee Super Balanced option, which is inflation plus 3% (CPI+3%).

Net investment returns (after fees and tax) for REI Super’s main investment options were:

 Where the returns came from during the quarter

Our investments that contributed to our strong performance during the quarter were international shares and Australian listed property.

International shares returned 9.6% for the quarter. Our Japanese shares investments particularly boosted returns, with a return of 18.1%. This portfolio performed well due to the large amount of central bank stimulus being provided in Japan.

The Australian dollar fell in value against most major currencies, which resulted in positive returns from foreign investments. Our investment options benefited from these positive developments as well as from several decisions we made last year, including increasing our investments in Japanese shares and emerging markets, reducing our investments in US shares and increasing our exposure to currency.  

Australian listed property returned 9.2% for the quarter.  As was seen with many high yielding investments, the Reserve Bank of Australia’s interest rate cut helped to drive investor enthusiasm, which moved prices higher.  

REI Super’s investment strategy

We seek to get the best possible investment returns for our members by:

1. identifying investments that offer good value and a good reward for their risk,
2. diversifying across a range of different types of assets, countries, industries and currencies and
3. investing less when markets are expensive and investing more when they are cheap.

Right now most markets are expensive so we are being a little more cautious than usual and holding extra cash.

The prices of shares, property and bonds have gone up a lot in recent years. Prices are above fair value for many markets, which means we can expect future returns to be lower than usual.

There are still some attractive opportunities in investment markets, however. Within share markets we favour Japanese and emerging markets shares and within bond markets we favour Australian bonds.

Note: The market indices referred to above for the different asset classes are:

Australian shares:                                   S&P/ASX300 Accumulation Index
International shares:                              MSCI AC World ex-Australia Index
Australian Listed Property:                     S&P/ASX300 Property Trust Accumulation Index
International Listed Property:                 UBS Global Real Estate Investors Index
Australian bonds:                                    Bloomberg AusBond Composite Index
International bonds:                               Barclays Global Aggregate Index

Future investment performance can vary from past performance, and you should not base your decision to invest in REI Super simply on past performance. Past earning rates are not an indicator of future earning rates. The investment returns of REI Super are not guaranteed, and the value of the investment may rise or fall.

The information contained in this article does not constitute financial product advice. However, to the extent that the information may be considered to be general financial product advice, REI Super advises that REI Super has not considered any individual person’s objectives, financial situation or particular needs. Individuals need to consider whether the advice is appropriate in light of their goals, objectives and current situation.