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.

The cash component of the Common Account is invested in bank term deposits. The Common Account also 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. So, where approved, part of the client's funds are invested outside the Common Account in the Public Trustee's investment funds.

The recent turmoil in global financial markets has impacted on all investors portfolios. This has been well covered in the media. After strong returns in recent years, the market values across the major assets groups have fallen substantially.

However, 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 at current prices are able to go through this downward part of the investment cycle with no long term detriment.

Those clients who need to sell and have been long term investors will have benefited from the markets overall capital increases over time as well as the income these investments have generated.

The current downturn in investment markets is better viewed from the perspective of longer term historical returns. The following data is based on 20 year returns to 30 June 2008:

	Australian Shares	Australian Listed Property	Cash
Best Year	30.3%	28.5%	18.5%
Worst Year	- 12.1%	- 36.3%	4.7%
Average	10.4%	10.1%	7.8%

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: 30-Jun-2009

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