Dear Member

Welcome to the June edition of the WA Local Government Superannuation Plan newsletter, brought to you by the team at Western Financial.

Latest News
	ASIC says look at long term performance ASIC is concerned members may engage in switching behaviour to their ultimate detriment..read more
	Market Wrap Share markets in May consolidated the gains made in April..read more
	Fund performance Check out your fund's five, three and one year rolling returns..read more
	Dearson's Diatribe Western Financial Member Services Consultant, Chris Dearson shares his insightful views on the world of sport..read more

ASIC says look at long term performance

On June 20 the Australian Securities and Investments Commission (ASIC) released a press statement which amongst other things voiced their concern about some members potential response as a result of recent market volatility.

"We think that many super funds will want to provide a longer-term picture of super returns to members who might not fully appreciate that super returns fluctuate over time and that even negative returns during some periods can be consistent with successful long-term investment. Not having this perspective might result in some fund members focussing on short-term results and, in a year of negative returns, potentially engaging in switching behaviour to their ultimate detriment. This work follows the findings of the Government’s Super Advisory Group that reporting long-term super fund performance will help members." the press release stated.

ASIC has even gone to the trouble of producing a leaflet showing typical super funds 5 and 10 year performance figures. According to FIDO, ASIC's consumer website, "it's important to remember that a super fund's investment performance will change from year to year. Your super will grow over the long term, but you might experience some years of low and even negative returns. This is generally normal."

Read FIDO's comment on super funds returns (ASIC website)

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Market Wrap

Share markets in May consolidated the gains made in April when the first positive monthly returns for six months were recorded. The early part of the month saw a continuation of the momentum which developed during April and then markets partially retreated as economic concerns and strong rises in oil prices returned. The A$, supported by the strength of the domestic economy and the likelihood of further interest rate rises, rose against most major currencies with the RBA Trade Weighted Index being almost 3% higher.

Merger and acquisition activities were back in vogue during May.  During the month, Westpac offered 1.31 of its shares for every St George Bank share which valued St George at around $18 billion at the time.  Other major M&A announcements include the QBE Insurance bid for Insurance Australia Group which was ultimately rejected by the target; the BG Group (UK based energy company) bid for Origin Energy; and iron producer Midwest being approached by SinoSteel (China based steel producer) and Murchison Metals.  The energy sector was the best performing sector which rose 19.9% in May.  The two major stocks in the energy sector, Woodside Petroleum and Santos Limited, were up 16.3% and 32.7% respectively while Origin Energy (takeover target) was up 11.8%. The small cap stocks outperformed the bigger cap stocks during the month, where the Small Resources Index (+12.1%) outperformed the broader market significantly.

Most major overseas share markets continued their recovery in May, with the MSCI World ex Australia returning 1.6% in local currency terms but only 0.3% in A$ terms due to the strength of the local dollar. During May, the US equity market gained ground, buoyed by economic news such as stronger than expected durable goods orders and a surprised bounce in new home sales in April, even though house prices and consumer confidence continued to weaken.  The US equity market, as measured by the MSCI USA Index in local currency terms, rose 1.5% in May.  Major European equity markets posted mixed results in May as measured by various MSCI indices in local currency terms.  France was the best performing market (+2.3%), followed by Germany (+1.8%), while UK fell by 0.4%. The Japanese market also recorded strong results, gaining 3.6% despite weak economic data released during the month.

The Australian listed property market could not hold on to its gain in April. The S&P/ASX 300 A-REIT Accumulation Index fell nearly 9.0% in May amid major concerns with issues such as gearing levels, potential reduction in future distributions and uncertain property values.

Heightened concern with inflation due to higher oil prices hurt the global bond markets.  Long term bond yields across most developed economies rose with the Australian ten-year government bond yield rising 24 bps to 6.53%, the US ten-year bond yield increasing 33 bps to 4.06% and the UK ten-year bond yield also gaining 32 bps to 4.99%.

Source: Counterpoint Group May 2008

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Fund Performance

In line with the Australian Securities & Investments Commission Regulatory Guide 191, "Superannuation - helping investors look at longer-term returns", WALGSP will provide rolling five, three and one year returns on a monthly basis. Future newsletters will also include ten year returns for those options that have been in operation that long.

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Dearson's Diatribe - The world of sport according to Chris

FOOTY:

The WA teams are staggering along with one win each in the last 6 games.

We know there will be at least one more win for one of them as the 2nd Derby has to be played. Though the way they are playing it will be a nil all draw.

Even my wife’s team Essendon beat the Eagles which shows how low we have fallen.

CRICKET:

The Aussies had a nice holiday in the West Indies and won the test series which is good news with all the new players in the team.

The Kiwis beat the Poms with 51-run win over England at Lord’s. I am in the UK next month so will try to see if any of the Poms will be good enough for the next Ashes series.

SOCCER:

Chelsea lost everything, ManU won the important ones – just about sums up the season.

Chelsea have won only one competition this year - the most coaches sacked in the season.

Spurs are through to Europe after beating Chelsea in the League Cup so I am happy.

RUGBY:

The Aussies managed to get away with a win over Ireland, but only just and after a scrappy first half put the French away in the first test.

These tests against the Northern Hemisphere teams are just warm ups for the matches against NZ and SA.

If you lose one of these, then you are not likely to go well in the unofficial world championship for 2008 – the Tri Nations.

TENNIS:

Wimbledon is on for the insomniacs. Sorry, wouldn’t work for me as all the baseline play sends me to sleep

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