Message from the Chairman
It is a pleasure to deliver my first report as Chairman of the Military Superannuation and Benefits Board of Trustees. I regard my appointment as both an honour and an important duty.
It is my intention as Chairman to ensure that I continue to build on the heritage provided by my predecessor (Mr Charles Kiefel), under whose leadership the Fund grew in size to $3 billion and embraced innovative approaches to investment; approaches which are increasingly becoming the norm amongst major superannuation funds.
It is also my intention to look at ways of improving and expanding the services provided to Members and to adopt investment strategies aimed at achieving sustainable investment returns for Members over the long term.
This past financial year has not been without its challenges given the extreme volatility experienced in global markets in recent times – driven by concerns about recession in the USA, the sub-prime credit crisis and influenced by the continuing growth story in the emerging economies of China and India. In the six years prior to December 2007, Australian super fund investors witnessed very strong investment returns, largely as a result of sustained bull runs in both domestic and international equities. During this period, members of most superannuation funds enjoyed returns in the mid to high teens; the domestic equity markets in particular providing stellar results. However, investment markets tend to run in cycles and since the beginning of 2008 we have witnessed significant declines and high volatility in investment markets around the world. Indeed, from the high in November 2007 to the lows at year end, listed markets globally have shed as much as 28% of their value. In Australia, despite the encouraging start, the All Ordinaries Index finished the year 16.95% down. This was the worst performance for the index in 26 years and the worst June performance for 40 years.
In this environment most superannuation funds and particularly those with larger exposures to listed equities, have declared substantial negative returns for the first time in many years. For many new superannuation investors this is the first time that they have experienced negative returns on their retirement savings.
TopInvestment performance
MilitarySuper’s smaller exposure to listed markets, its larger exposure to alternative asset classes and its strategic decision to move to larger holdings in cash, have served the Fund and Members well during the current difficult period. Although the Fund recorded returns of -2.62%(net) and -0.48%%(net) respectively in the Growth and the Balanced investment options for the year, our strategy helped to cushion the impacts of the market downturn such that our returns for the year are significantly better than most of our peers.
Our returns in the other three investment options were +6.13%(net) in the Cash Option, +2.65%(net) in the Conservative Option and -3.86%(net) in the High Growth Option.
Whilst it may be of some comfort to Members to know that their fund performed better than its peers, the fact remains that the returns for three of the five investment options were negative. Therefore, it is timely and appropriate to remind Members that our key objective in managing these retirement savings is to achieve superior results over the medium and long terms. To demonstrate this important point, the positive average annual returns achieved over the past five years to 30 June 2008 were:
High Growth 12.7%
Growth 11.4%
Balanced 10.7%
Conservative 7.5%
Cash 5.1%
Acknowledgements
During 2007–08 there were three significant changes to the five member Board. After 10 years of exceptional leadership, Mr Charles Kiefel stood down as Chairman. Dr Michael Sharpe retired after 9 years service as both Trustee and Chairman of the Board’s Audit and Risk Management Committee. Air Commodore Lee Roberts resigned as Trustee and Chairman of the Board’s Communications Committee in order to take up an overseas employment opportunity. All three Trustees made significant contributions to the operations of the Board during their tenure and were unstinting in their determination to serve the best interests of members of the ADF.
Although these departures represented a significant loss of experience, I am pleased to advise that the appointments of Mr Gabriel Szondy and Brigadier Bob Brown have ensured that the Board is well equipped to fulfil its role as Trustee.
Mr Szondy was formerly a Senior Partner with PricewaterhouseCoopers. He has had over 30 years experience in the superannuation industry and is regarded as a leading authority on Australian superannuation funds. Brigadier Bob Brown has had a distinguished career in the Australian Defence Force and had previously served as a Trustee on the MilitarySuper Board. He then served as Chairman of the Board’s Communication Committee and now brings a wealth of knowledge and experience as Employee Representative to this Board.
I wish to place on record my appreciation of the efforts of all of the Trustees, both current and past, who have done so much to ensure that MilitarySuper continues to serve the interests of Members and government at such a high level. I am also grateful for the ongoing support of the Minister, the Department of Defence and the Chiefs of the Defence Force.
On behalf of the Board, I would also like to commend the work of our investment advisors Strategic Capital Management as Lead Advisor, Sovereign Investment Research as advisor in the alternative asset sector, members of the Board’s Investment Committee and the Board’s in-house investment team for the significant work undertaken in the research, monitoring and review of the Fund’s investment strategy, manager configurations and new investment opportunities. The outcome of this work continues to have significant long-term benefits for all members of the Scheme.
I would also like to express the Board’s thanks to the Board Executive for sound advice, assistance and support; to the Scheme Administrator (ComSuper) for their ongoing commitment to servicing Members of the Scheme in a year of considerable challenge; to the Fund Custodian (National Custodian Services) and to all of the Members of the Board’s committees and the Board’s advisors for their continuing good work throughout the year.
TopOngoing commitment
The superannuation industry is developing fast and the MilitarySuper Board is keen to move with and indeed even lead some changes, always in the best interests of our Members. Our ongoing aim is to provide efficient administration and valuable services to Members and to achieve superior investment returns on Member savings over the medium and long terms.
The Board remains determined to ensure that MilitarySuper is one of the best superannuation schemes in Australia.
Tony Hyams
Chairman