Another good period for share market investors
World share markets produced solid returns in the first half of the financial year. While geopolitical issues, concerns over the durability of the global recovery and the prospect of quantitative easing (QE) in the US coming to an end all contributed to bouts of market volatility, they didn’t prevent global share markets posting reasonable gains. For the six months to December, global shares had produced a return of 4.8% for Australian investors in hedged terms (that is, when the foreign currency exposure is hedged to the Australian dollar) and more than 13% in unhedged terms. The Australian dollar lost more ground against a resurgent US dollar, which was boosted by the impending end of QE in the US, ongoing QE in Japan, and the potential for QE in Europe.
Emerging share markets have continued to underperform those in the developed world, despite several key emerging markets being among the world’s best performers. The rally in these markets were driven by the election of reform-minded leaders in India, Indonesia, and a surprise cut in official interest rates in China saw the Chinese market returning more than 18% for the half year. In the developed world, the US share market enjoyed a solid 6% return on the back drop of positive economic news, whilst Japan and Europe continued to struggle with the possibilities of deflation.
Back at home, our market managed a positive return supported by signs of improving economic growth outside the mining industry. Strong gains in listed shares in the real estate trust, healthcare and telecommunications sectors were offset by losses in mining shares, due to a significant fall in the iron ore price, which fell to its lowest level in five years.
Bond investors enjoyed much better returns in the second half of 2014, with yields falling in most major markets (bond yields and prices move in opposite directions). However, there was generally a widening in credit spreads – the difference in yield between government and non-government bonds – so non-government bonds tended to underperform government. The extraordinarily low level of interest rates and bond yields across the globe encouraged investors to keep seeking alternative sources of income. As a result, real estate investment trusts (REITs) both in Australia and globally continued to be highly sought after this financial year. Despite the very strong performance of Australian REITs in recent years, the sector has yet to recoup the losses it incurred during the global financial crisis.
Overall, the investment environment remains uncertain
Australian investors have enjoyed very good returns from multi-asset investment strategies over recent years, underpinned by the strong performance of world share markets. However, some important issues are unresolved and the post Global Financial Crisis (GFC) investment environment is far from predictable.
The NESS Investment Committee are watchful of developments and committed to delivering appropriately diversified investment portfolios which are well constructed for the market environment.
Looking out for 2015, NESS Super continues to invest member funds with a long term approach in order to deliver on our objective of providing sound retirement benefits. We are mindful that equity markets have had strong returns in recent years and are watchful of development and committed to delivering appropriately diversified investment portfolios, which are well constructed for the market environment. We will continue to work hard to invest wisely for the benefit of our members.
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NESS Super is the superannuation fund totally dedicated to the electrotechnology industry.
Disclaimer: The information contained in this article is up-to-date at the time of its publication. However, some information can change over time. The contents are for general information only and do not constitute personal advice. We recommend that you consult with a suitably qualified person before making any financial decisions.
The performance of the NESS Super and NESS Pension investment options are not guaranteed. The value will vary as it is based on the performance of the assets underlying each investment option. Past performance is not a reliable indicator of future performance.