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Market Update

MilitarySuper’s investment strategy and options are designed to diversify investments across asset classes, such as listed Australian and international equities, cash, bonds, property and alternative (unlisted) investments such as private equity, hedge funds and infrastructure.

The continuing global financial crisis has negatively affected all but MilitarySuper’s Cash option over the past 18 months.  The crisis initially most affected listed markets, which the Fund reduced its exposure to in late 2007. This decision initially provided a buffer against the large falls experienced in these markets from late 2007 until March this year.

Fundamental to its long-term investment and risk mitigation strategy, MilitarySuper holds a range of alternative or unlisted assets.  These assets are periodically re-valued (typically quarterly).  Valuations of these investments take into account the asset’s economic performance, comparable values to publicly listed assets of a similar character and macro-economic conditions and outlook.

As a result of the continuing difficult business and economic conditions being experienced around the world, there has been a downward trend in the most recent round of valuations for a number of MilitarySuper’s unlisted assets.

The Board has recently received and acted on updated valuations on its US property investments, which have fallen sharply in value.  Accordingly, all MilitarySuper investment option unit prices, except Cash, have declined as at 19 August 2009.

The Board recognises that this and other recent downward adjustments to the carrying value of some investments as a consequence of the continuing global financial crisis and specifically the United States’ property market are disappointing.

The Board’s investment strategy, however, remains based on economic activity driving long-term wealth creation and it remains committed to buying and holding quality assets for the longer-term and across economic ‘boom and bust’ cycles.

Further details relating to the Fund’s recent performance and other information will be provided to members in MilitarySuper’s 2009 annual report.