Investment performance

The Public Trustee's Investments team is responsible for managing the Common Account, which holds funds that have been placed in trust for clients of the Public Trustee. The Common Account operates like a cash management account, with funds being available at call while earning a competitive rate of interest and is capital guaranteed.

The cash component of the Common Account is invested in bank term deposits and CBD real estate. The Common Account owns the building occupied by the Public Trustee, providing security of tenure for the Agency while building capital growth for the Account

Some clients have substantial funds in their trust. In addition to providing for their immediate care, they also need their trust to provide for their care over many years into the future.

The Public Trustee knows that, in the long term, the effect of inflation on the capital would diminish the ability for this care to be provided. Where approved, part of the client's funds are invested outside the Common Account in the Public Trustee's Investment Funds (PTIFs). The PTIFs are explained below

The turmoil in global financial markets in 2008-09 impacted on all investors' portfolios. This has been well covered in the media. Strong returns in recent years were offset as market values across all the major assets groups fell substantially.

Governments around the world took extraordinary measures to counteract the impact of what is now called the ‘global financial crisis’ or GFC. The effects of these measures has seen a degree of recovery and stability in financial markets. Client portfolios have participated in this overall recovery of asset values.

Although the recent situation was severe, history shows that investment markets periodically go through cycles where asset prices rise above their real values, followed by declines as these excessive prices are adjusted downwards. Over time, the cycle shows that asset values rise again.

Public Trustee clients with investment assets are not immune to these market fluctuations. However, the clients whose portfolios are based on a long term outlook and don't need to sell assets when prices fall are able to go through the downward part of the investment cycle with no long term detriment Those clients who need to sell and have been long term investors benefit from the market's overall capital increases over time, as well as the income these investments have generated.

The downturn in investment markets in 2008-09 is better viewed from the perspective of longer term historical returns. The following data is based on 30 year returns to 30 June 2009 (Note these are financial, not calendar years):

	Australian Shares	International Shares	Cash
Best Year (to June 30)	74.3%(1980)	72.7%(1983)	18.5%
Worst Year (to June 30)	-29.09%(1982)	-32.5%(2002)	4.7%
Average	15.0%	12.7%	9.7%

Source: Vanguard

Thus, while markets are volatile in the short term, and can produce negative returns in any one year, returns over the long term more than offset inflation. The Public Trustee monitors client portfolios to ensure the most prudent actions are taken to achieve this long term objective.

Last Updated: 22-Feb-2010