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F U N D S

MAN A G E M E N T S E RV I C E

QUARTERLY INVESTMENT

REPORT

31 March 2020

` Quarterly Investment Report – 31 March 2020

Produced by THE P U B L I C T R U S T E EGPO Box 1338 Adelaide South Australia 5001 T 08 8226 9200 | F 08 8226 9350Country freecall 1800 673 119 (landline only)www.publictrustee.sa.gov.au


This Quarterly Investment Report presents the results of the Public Trustee’s Funds Management Service for the quarter ended 31 March 2020.

At the end of the March 2020 quarter, the Public Trustee had $1.03 billion in funds under management. The Public Trustee’s Funds Management Service has a record of high quality, proven and consistent investment performance.

For the March quarter, investment returns have been severely impacted by the COVID-19 pandemic. Ordinarily defensive style investments, like property and infrastructure, perform well in volatile markets, however many of these assets (e.g. airports, toll roads, seaports and retail property) declined in value due to travel restrictions and social distancing requirements. As a result, some investment classes underperformed expectations.

Despite the short term volatility in markets, in the long term markets are expected to recover and present opportunities. Since March markets have become more stable due to the significant stimulus provided by Central Banks and governments to combat the economic effects of the virus.

It is important to note that although some returns may be negative for the quarter, the Public Trustee’s investment strategies have performed well over the long term. All of the investment strategies have outperformed their industry benchmarks over 5, 7 and 10 years.

The Public Trustee’s investment strategy performance versus CPI targets, after the March quarter are as follows:

SIS Performance versus CPI Objectives as at 31 March 2020

Investment Strategy CPI Objective Investment

Horizon

Target Return % pa

Actual Return %

pa

Over (+) / Under(-)

Outperformance % pa

Capital StableCPI + 1.5% pa 3 Years 3.31% 1.74% (-) -1.57%

Balanced CPI + 3% pa 5 Years 4.77% 2.63% (-) -2.14%

Growth CPI + 3.5% pa 7 Years 5.37% 5.79% + 0.42%

Equities CPI + 4% pa 10 Years 6.05% 6.76% + 0.71%

For any enquiries regarding your investments please contact Cosi Capozza on 08 82269223.

Nicolle RantanenActing Public TrusteeMay 2020


Market OverviewGlobalGlobal markets were severely impacted by the COVID–19 pandemic during the quarter. In order to contain its spread, restrictions were placed on travel and ‘social distancing’ was mandated by governments. A number of countries went into strict ‘lockdown’, with only essential services remaining open. This created immense volatility on markets, not seen since the Global Financial Crisis (GFC). Share markets and Real Estate Investment Trusts (REIT’s) were the worst affected. Oil prices slumped to 17 year lows, and even gold did not represent a safe haven from the turmoil late in the quarter. The US fiscal response has been significant, with the largest stimulus measure costed at $2 trillion US Dollars which includes $425 billion worth of loans for business and $300 billion in cash payments to individuals.

AustraliaThe Reserve Bank of Australia (RBA) reduced official interest rates twice to a record low of 0.25% during the quarter. The Australian Government also announced fiscal measures to help stabilise the economy, totaling more than $200 billion. During the quarter the Australian Dollar depreciated significantly against most major currencies, finishing the quarter at $0.61 US.

Share Markets

The S&P ASX300 Index returned -23% in the March quarter, with the local Index delivering its worst quarterly performance since 1987. Global share markets fell by 21% on a hedged basis, or 21% on an unhedged basis due to the fall in the Australian Dollar.

Key DevelopmentsKey developments over the quarter were:

The significant impact of COVID-19 Extreme market volatility not seen since the GFC A collapse in oil prices Depreciation of the Australian Dollar Central Banks cutting interest rates to record lows Unprecedented fiscal stimulus provided by global governments

Since 1990, funds invested through the Public Trustee have grown from $160 million to $1.03 billion today.


Cash Investment StrategyDuring the quarter, the RBA reduced interest rates by 0.25% on two consecutive occasions from 0.75% to a new low of 0.25%. The fund’s return of 0.22% for the quarter was above the benchmark return by 0.21%. The strategy’s 3, 5, 7 and 10 year returns of 1.67%, 1.84%, 2.19% and 3.01% are all ahead of benchmark.

Crediting Rate:

The investment return for this fund is calculated daily, based on the net earnings of the fund. The daily crediting rate as at 31 March 2020 was 0.80% p.a.

Fund size: $367 million.

Performance Quarter % 1 year % 3 year %* 5 year%** 7 year%** 10 year%**

Return (after fees) 0.22% 1.37% 1.67% 1.84% 2.19% 3.01%

Benchmark** 0.01% 0.23% 0.66% 0.83% 1.09% 1.79%

Difference 0.21% 1.14% 1.01% 1.01% 1.10% 1.22%

*Annualised ** Index return on Strategic Asset Allocation

Objective:

Funds assigned to the cash investment strategy are invested in the Public Trustee's Cash Fund. The objective of the Cash Fund is the preservation of capital. The strategy is intended for investors who are seeking secure returns at prevailing short term interest rates.

Capital Stable Investment StrategyThe strategy’s return for the quarter was -5.38%, underperforming the benchmark return by 0.92%. The Strategy’s 3 year and 5 year returns of 1.74% and 2.23% are 0.49% below and 0.05% ahead of benchmark respectively.



Return (after fees) -5.38% -1.34% 1.74% 2.23% 3.56% 4.31%

Benchmark** -4.46% -0.82% 2.23% 2.18% 3.45% 4.14%

Difference -0.92% -0.52% -0.49% 0.05% 0.11% 0.17%


Objective:

The objective of this strategy is to achieve CPI +1.5% p.a. over a three year time frame, by strategically allocating 28% of the funds in growth assets and the balance in fixed interest and cash. It is suitable for investors who are seeking higher returns than cash over time and are prepared to accept a slight increase in risk in terms of downward movements in the value of their capital from time to time.

Australian Shares 8%

Overseas Shares 7%

Property 10%

Long Term Fixed Int

16%Short Term Fixed Int 28%

Overseas Fixed Int

12%

Cash 19%


Balanced Investment Strategy

The strategy’s return for the quarter was -10.32%, underperforming the benchmark return by 1.01%. The strategy’s 7 year and 10 year returns of 4.92% and 5.55% are respectively 0.03% and 0.08% ahead of benchmark.




Benchmark** -9.31% -3.89% 2.50% 2.61% 4.89% 5.47%

Difference -1.01% -0.21% -0.65% 0.02% 0.03% 0.08%


Objective:

The objective of this strategy is to achieve CPI + 3% p.a. over a five year time frame, by strategically allocating 55% of the funds in growth assets and the balance in fixed interest and cash. It is suitable for medium term investors who seek higher returns and are prepared to accept some volatility in the value of the funds invested.

Growth Investment StrategyThe strategy’s return for the quarter was -13.83%, slightly underperforming the benchmark return by 0.79%. The strategy’s 7 year and 10 year returns of 5.79% and 6.21% are respectively 0.21% and 0.36% ahead of benchmark.




Benchmark** -13.04% -6.32% 2.16% 2.60% 5.58% 5.85%

Difference -0.79% 0.14% -0.40% 0.19% 0.21% 0.36%


Australian Shares

26%

Overseas Shares

24%Property 21%

Long Term Fixed Int

14%

Short Term Fixed Int

5%

Overseas Fixed Int

6%Cash 4%

Australian Shares 16%

Overseas Shares 15%

Property 20%

Long Term Fixed Int

24%

Short Term Fixed Int 8%

Overseas Fixed Int

12%Cash 4%


Objective:

The objective of this strategy is to achieve CPI + 3.5% p.a. over a seven year time frame by strategically allocating 73% to growth assets and the balance in fixed interest and cash. It is suitable for long term investors who are prepared to accept high volatility in the value of the funds invested.

Equities Investment StrategyThe strategy’s return for the quarter was -20.33%, slightly underperforming the benchmark return by 0.40%. The strategy’s 7 year and 10 year returns of 6.85% and 6.76% are respectively 0.31% and 0.66% ahead of benchmark.




Benchmark** -19.93% -10.75% 1.23% 2.46% 6.54% 6.10%

Difference -0.40% 0.73% 0.00% 0.30% 0.31% 0.66%


Objective:

The equities strategy offers 100% exposure to the world’s share markets. Over the long term, it offers the prospects of high returns but with the likelihood that capital values will fluctuate broadly in line with the fortunes of the share markets. Typically, this strategy may be used to enhance returns in conjunction with one of the other investment strategies.

The objective of this strategy is to achieve CPI + 4% p.a. over a 10 year time frame, with exposure to both domestic and overseas share markets. It has a 55%/45% strategic allocation to the two markets respectively.

NB: All the above investment strategies are exercised through investment in one, or a combination of, the Public Trustee Common Funds.

The investment returns presented in this quarterly report relate to past performances and must not be taken to imply that this predicts future returns of the funds. The information and opinions contained in this report have been compiled or are arrived at by the Public Trustee from sources believe to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness or correctness.

The information in this report is of a general nature. The Public Trustee strongly recommends that you contact our Office to discuss your particular circumstances. The Public Trustee does not accept any liability whatsoever for any direct or consequential loss arising from any usage of information herein contained.

Australian Shares

53%Overseas

Shares47%


THE P U B L I C T R U S T E EGPO Box 1338 Adelaide South Australia 5001 T 08 8226 9200 | F 08 8226 9350Country freecall 1800 673 119 | www. publictrustee.sa.gov.au

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