Performance

To 30 September 2009

The global economic recovery moved to firmer footing in the September quarter driven by rebuilding of inventories, continued aggressive fiscal and monetary stimulus, improved financial and capital market conditions and very effective reflation policies in emerging economies, particularly China. Australia’s economy continues to perform relatively strongly, as evidenced by strengthening activity data and rising consumer and business confidence.

Not surprisingly, global equity markets surged following similar strength in the June quarter. With fears of a global meltdown allayed and growing conviction in economic recovery, corporate earnings forecasts for 2010 were upgraded.
The Australian dollar continued to perform strongly against the USD, the latter suffering from concerns about high government debt issuance and more currency diversification by other central banks. The AUD strength reflects the key role of China, Australia’s number one trading partner, in the global recovery.

Adding support to the strong rally in equity markets, long dated Australian and global bond yields declined over the quarter. Australian 10-year bond yields fell 16bps finishing the quarter at 5.36%. This was despite commentary from the RBA foreshadowing an end to the stimulatory cash rates set during the global financial crisis, made evident in October when official rates rose 25bps and again this week. 

Table 1 - Performance to 30 September 2009

VFMC builds investment portfolios to achieve each of our clients’ long term investment objectives within acceptable risk tolerances. 

Table 1, above, shows the performance of DTF portfolios on an aggregate basis relative to a composite benchmark. It provides the performance for each asset class relative to their respective benchmarks. Table 1 also shows the asset allocation of these clients’ portfolios on an aggregate basis.

The long term nature of our portfolio means we have significant investments in unlisted asset classes. The lagging nature of unlisted assets has been a slight drag on relative performance over the September quarter, a period in which listed markets surged while Private Equity valuations, for example were only raised modestly. Diversified Fixed Interest and Absolute Return Funds benefited from a narrowing of credit spreads with both sectors outperforming their benchmarks. 

Table 2 – Funds under Management

Note:* All clients
         ^ This includes client withdrawals and redemptions

Table 2 reveals an increase in funds under management (FUM) from $31.1 billion to $33.9 billion, a rise of $2.8 billion for the quarter.