Strategic Asset Allocation Your investment team is hired to manage a large define contribution superannuation fund in Australia. The fund provides eligible employees with a convenient way to save on a regular and long-term basis for retirement. The fund offers investors with four investment options – growth, balanced, conservative and cash. Below are the details of these investment options: Growth – Around 85% (range ± 10%) in growth assets, and the rest in defensive assets. Aim for high returns over the long run. This investment option results in high volatility with negative returns expected 4-6 years out of 20. Balanced – Around 65% (range ± 10%) in growth assets, and the rest in defensive assets. Aim for reasonable returns but less than the growth fund to reduce risk of losses in bad years. This investment option results in medium volatility with negative returns expected 3-5 years out of 20. Conservative – Around 40% (range ± 10%) in growth assets, and the rest in defensive assets. Aim to reduce risk of losses over the long run. This investment option results in low volatility with negative returns expected 0 years out of 20. Cash – 100% in deposits with Australian or foreign deposit-taking institutions. This investment option results in very low volatility with negative returns expected 0 years out of 20. The investment guidelines are based upon an investment horizon of greater than ten years. Accordingly, the decision on asset allocation will reflect the long-term investment risk/return objectives for each investment option. Since the investment is long-term, the influence of financial crisis and business cycle is supposed to be less important. Short-term liquidity requirements are anticipated to be non-existent. The client recognizes that some risk must be assumed in order to achieve the investment objectives of the plans. The client also states that the portfolios should be monitored and reviewed yearly. Asset class guidelines: The client has specified six asset classes for investment: (1) Australian equities; (2) Australian Real Estate; (3) US large equities; (4) Australian government bonds; (5) US government bonds; and (6) Australian short-term money market instruments. Interest-generating investments, such as bonds and short-term money market instruments, have historically provided little opportunity for real long-term capital growth due to their susceptibility to inflation. Equity investments, on the other hand, have significantly higher expected returns but have the disadvantage of much greater variability of returns. 1 Individual Client Gloria, aged 40, is a single mother with two kids living in Melbourne. She is a service manager at XYZ Company and earns an annual salary of $65,000 before tax. Her salary is expected to grow at 2% annually (in nominal terms). Following the Australian superannuation rule, her company pays 9.5% of each employee’s regular income (before tax) to their nominated superannuation fund, at the same time as the company pays their staff wages. She has accumulated $80,000 in her superannuation. She is passive in investment and thinks that term deposit is an ideal investment solution. During your discussion with the Gloria, she tells you: • My personal contribution to the superannuation is 0%. I can increase my contribution to the super but I don’t think there are any benefits doing so;1 • On average, my living expense is about 3,000 a month (based on the most recent year figures); • I receive income on a monthly basis; • I always choose the ‘cash’ option in my superannuation as this is the safest; • I have no debts and own a property worth $700,000 at the current market value; • I don’t have any financial assets; • My elder child will go to high school in 5 years; • I don’t expect to retire before age 65; • I think it’s important to have an emergency fund to cover at least 3 to 6 months’ worth of living expenses; • I don’t know how much is required for my retirement.2 For simplicity, ignore how employer contribution is taxed and assume Gloria’s salary and all capital gains and investment income are taxed at 30% and no tax-sheltering strategies are available. 3 1 Please see https://www.ato.gov.au/Individuals/Super/Growing-your-super/Adding-to-my-super/Personal-super-contributio ns/ on how much you can put into the super fund. For simplicity, in this assignment, we assume there is no limit to how much Gloria allowed to add to her super. 2 See https://www.superguide.com.au/boost-your-superannuation/comfortable-retirement-how-much-super-need (How much super do you need to retire comfortably?). 3 The cash flows go into the super fund may grow over time (e.g. due to increase in salary) at a constant rate. This is known as graduated annuity and you need to consider the growth rate in cash flows in the calculation. See http://www.tvmcalcs.com/index.php/calculators/apps/excel_graduated_annuities for examples. 2 Required Information: Part 1: Strategy Asset Allocation (SAA) (40 marks) For this part, assume all investments are at benchmark. Do not take into consideration the impact of any active investments. For simplicity, do not consider taxes and transaction costs on any income generated. 1. Analyse the performance of each asset class and examine the relationships among them. Discuss the role each asset class plays in an investment portfolio. 2. Use arithmetic means as the expected returns for the asset classes going forward (and any other relevant historical statistics), come up with four appropriate SAA portfolios (growth, balanced, conservative and cash). Discuss your asset allocation decisions in detail. 3. Apply the asset allocation to the provided historical data and calculate the performance of your portfolios. Comment on the performance and discuss how the portfolios meet their investment objectives. You must at least provide the following to accompany your analysis: a. Average portfolio returns (“arithmetic” for both monthly and yearly) and Sharpe ratios over the sample period; b. Average returns (yearly) of trailing 3 and 5 years at the end of every year; c. Graph and compare the performance of your portfolios over time; d. Standard deviation (both monthly and yearly) of your portfolios over the sample period; e. Probability of a negative return in any one year over the sample period. 4. Your team charges management fees (excluding transaction costs) for each investment options. Typically, fees are highest on those assets that are relatively costly to manage, such as foreign market asset, and lowest on cash-based funds. Assume the average fees across similar types and size of funds are about 1% per annum for the growth, 0.8% for the balanced, 0.6% for the conservative, and 0.1% for the cash. Discuss how management fees affect the overall performance of the funds. 5. A sale pitch on why investors should go with your portfolios? How do these portfolios benefit them, and why they are better than alternatives? Part 2: Individual Investor (15 marks) For this part, your need to create an Investment Policy Statement for Gloria and recommend an investment portfolio (choose one portfolio from the four SAA portfolios you have created in Part 1 above) that satisfies her needs. 3 1. Formulate the risk and return objectives. 2. Formulate the following investment constraints: a. Time horizon; b. Liquidity requirement; c. Legal and regulatory factors;` d. Unique needs and preferences. 3. Based on the investment objectives you have identified, recommend an appropriate investment portfolio (based on the four portfolios you have created in Part 1 above) for Gloria. Suggest investment strategies to help Gloria better achieve her goals. 4 Australian Equities Name S&P/ASX 200 1/29/1993 2/26/1993 3/31/1993 4/30/1993 5/31/1993 6/30/1993 7/30/1993 8/31/1993 9/30/1993 10/29/1993 11/30/1993 12/31/1993 1/31/1994 2/28/1994 3/31/1994 4/29/1994 5/31/1994 6/30/1994 7/29/1994 8/31/1994 9/30/1994 10/31/1994 11/30/1994 12/30/1994 1/31/1995 2/28/1995 3/31/1995 4/28/1995 5/31/1995 6/30/1995 7/31/1995 8/31/1995 9/29/1995 10/31/1995 11/30/1995 12/29/1995 1/31/1996 2/29/1996 3/29/1996 4/30/1996 5/31/1996 6/28/1996 7/31/1996 8/30/1996 9/30/1996 10/31/1996 11/29/1996 12/31/1996 S&P/ASX MIDCAP 50 1536,5 1620,2 1674,5 1685,2 1737,4 1734,6 1837,1 1961,6 1919,8 2070,6 1953,7 2113,6 2244,4 2112 1980,1 2004,2 2021,2 1931,1 2003,5 2063,9 1967,7 1980,9 1833,8 1857,4 1784,7 1881,1 1867,1 2006,5 1981,4 1981 2083,3 2094,3 2091,3 2029,7 2113,2 2154,9 2227,8 2228,2 2164 2248,7 2198 2171,8 2114,1 2196,1 2218,6 2286,2 2325,9 2367,8 1323,6 1380,4 1510,7 1600,3 1736,7 1759,7 1944,3 1965,3 1935,2 2093,6 2009,4 2221,8 2333,7 2177,4 2088,6 2045,1 2043,2 1939,9 2009,8 2053,1 1995,9 1963,4 1803,6 1818,9 1722,1 1774,9 1763,3 1929,3 1877,3 1877,2 1940,6 1993,6 2031,5 1978,5 2084,2 2151 2297,1 2316,8 2286,8 2392,9 2359,3 2317,8 2256,9 2374,9 2398,5 2444,1 2461,8 2501,8 1/31/1997 2/28/1997 3/31/1997 4/30/1997 5/30/1997 6/30/1997 7/31/1997 8/29/1997 9/30/1997 10/31/1997 11/28/1997 12/31/1997 1/30/1998 2/27/1998 3/31/1998 4/30/1998 5/29/1998 6/30/1998 7/31/1998 8/31/1998 9/30/1998 10/30/1998 11/30/1998 12/31/1998 1/29/1999 2/26/1999 3/31/1999 4/30/1999 5/31/1999 6/30/1999 7/30/1999 8/31/1999 9/30/1999 10/29/1999 11/30/1999 12/31/1999 1/31/2000 2/29/2000 3/31/2000 4/28/2000 5/31/2000 6/30/2000 7/31/2000 8/31/2000 9/29/2000 10/31/2000 11/30/2000 12/29/2000 1/31/2001 2/28/2001 2370,7 2386 2360,5 2424,1 2544,9 2664,7 2673,7 2526,8 2703,1 2415 2424,1 2567,4 2600,8 2626,9 2686 2709 2655,3 2620,1 2661,3 2430,1 2511,3 2563 2685,6 2717,6 2781,7 2768,4 2867 3027,8 2831,9 2903,7 2951 2875,7 2817 2821,4 2970,3 3117,7 3080,2 3124,6 3133,3 3115,8 3081 3311,2 3251,1 3297,8 3298,8 3254,6 3274,6 3206,2 3341,7 3326,5 2474 2499,1 2431 2479,4 2582,6 2674,2 2724,1 2542,7 2634,8 2256,2 2202,7 2319,5 2398,6 2395,7 2403,9 2420 2351,9 2172,5 2209,2 2034,9 2166,2 2237,8 2309,5 2325,3 2375,8 2374,6 2423,6 2486 2344,7 2389,6 2487,9 2540,9 2499,3 2422,6 2513,8 2536,8 2396,5 2366,8 2352,6 2182,4 2126,7 2264,5 2291,2 2287,5 2197,1 2214,6 2277,9 2282 2324,5 2316,5 3/30/2001 4/30/2001 5/31/2001 6/29/2001 7/31/2001 8/31/2001 9/28/2001 10/31/2001 11/30/2001 12/31/2001 1/31/2002 2/28/2002 3/29/2002 4/30/2002 5/31/2002 6/28/2002 7/31/2002 8/30/2002 9/30/2002 10/31/2002 11/29/2002 12/31/2002 1/31/2003 2/28/2003 3/31/2003 4/30/2003 5/30/2003 6/30/2003 7/31/2003 8/29/2003 9/30/2003 10/31/2003 11/28/2003 12/31/2003 1/30/2004 2/27/2004 3/31/2004 4/30/2004 5/31/2004 6/30/2004 7/30/2004 8/31/2004 9/30/2004 10/29/2004 11/30/2004 12/31/2004 1/31/2005 2/28/2005 3/31/2005 4/29/2005 3147,2 3329,4 3379,1 3490,3 3324,5 3275,6 3049,5 3249,6 3337,5 3422,3 3464,2 3414,3 3414,8 3350 3373,6 3216 3086,2 3120,1 2970,9 3042,9 3061,4 3007,1 2956,9 2800,9 2885,2 3007,5 3011 3026,9 3122,3 3199,7 3169,5 3272 3186,4 3299,8 3272 3360,6 3415,3 3400,8 3460,2 3532,9 3536,1 3552,7 3665 3778,6 3931,3 4050,6 4107,3 4172,8 4109,8 3983,2 2247,6 2282,7 2289,1 2395 2390,1 2419,4 2315,3 2434,1 2510,1 2534,6 2615,5 2602,7 2642,6 2614,1 2702,4 2599 2494,6 2629,6 2516,1 2485,2 2484,1 2554,1 2569,6 2456,1 2479,2 2589,5 2654,9 2663,7 2758,4 2800,1 2860,4 3000,5 2945,4 2981,8 2930,2 3030,8 3089 3089,2 3133,4 3199 3308,9 3392,8 3515,3 3732,7 3868,9 4076,8 4124,3 4012,2 3990,1 3843,7 5/31/2005 6/30/2005 7/29/2005 8/31/2005 9/30/2005 10/31/2005 11/30/2005 12/30/2005 1/31/2006 2/28/2006 3/31/2006 4/28/2006 5/31/2006 6/30/2006 7/31/2006 8/31/2006 9/29/2006 10/31/2006 11/30/2006 12/29/2006 1/31/2007 2/28/2007 3/30/2007 4/30/2007 5/31/2007 6/29/2007 7/31/2007 8/31/2007 9/28/2007 10/31/2007 11/30/2007 12/31/2007 1/31/2008 2/29/2008 3/31/2008 4/30/2008 5/30/2008 6/30/2008 7/31/2008 8/29/2008 9/30/2008 10/31/2008 11/28/2008 12/31/2008 1/30/2009 2/27/2009 3/31/2009 4/30/2009 5/29/2009 6/30/2009 4106,4 4277,5 4388,8 4446,8 4641,2 4459,7 4634,8 4763,4 4929,6 4921,3 5129,7 5258,8 5001,7 5073,9 4986 5115,4 5154,1 5384,4 5482,1 5669,9 5773,4 5832,5 5995 6166 6313,5 6274,9 6144,2 6247,2 6567,8 6754,1 6533,1 6339,8 5650,3 5572,1 5355,7 5595,4 5654,7 5215,3 4977,4 5135,6 4600,5 4018 3742,5 3722,3 3540,7 3344,5 3582,1 3780,5 3818 3954,9 3945,7 4123,5 4270,9 4446,5 4626,3 4446,2 4689,4 4812,6 4827,6 4787,9 5102,1 5188,5 5016,2 5050,1 5003,6 5046,9 5183,7 5365,4 5595 5830,8 5901,4 6034,7 6209,4 6378,4 6652,1 6490,5 6299,2 6316,8 6669,2 6815,3 6646,9 6594,6 5815,7 5901,8 5487,9 5510,6 5554,8 5102,8 4907,8 5118,1 4589,7 3609,5 3309,7 3413,7 3156,2 2909,2 3092,1 3353,2 3438,4 3555,3 7/31/2009 8/31/2009 9/30/2009 10/30/2009 11/30/2009 12/31/2009 1/29/2010 2/26/2010 3/31/2010 4/30/2010 5/31/2010 6/30/2010 7/30/2010 8/31/2010 9/30/2010 10/29/2010 11/30/2010 12/31/2010 1/31/2011 2/28/2011 3/31/2011 4/29/2011 5/31/2011 6/30/2011 7/29/2011 8/31/2011 9/30/2011 10/31/2011 11/30/2011 12/30/2011 1/31/2012 2/29/2012 3/30/2012 4/30/2012 5/31/2012 6/29/2012 7/31/2012 8/31/2012 9/28/2012 10/31/2012 11/30/2012 12/31/2012 1/31/2013 2/28/2013 3/29/2013 4/30/2013 5/31/2013 6/28/2013 7/31/2013 8/30/2013 4244 4479,1 4743,6 4643,2 4701,3 4870,6 4569,6 4637,7 4875,5 4807,4 4429,7 4301,5 4493,5 4404,2 4582,9 4661,6 4584,4 4745,2 4753,9 4831,7 4837,9 4823,2 4708,3 4608 4424,6 4296,5 4008,6 4298,1 4119,8 4056,6 4262,7 4298,5 4335,2 4396,6 4076,3 4094,6 4269,1 4316,1 4387 4517 4506 4648,9 4878,8 5104,1 4966,5 5191,2 4926,6 4802,6 5052 5135 3900,7 4152,1 4389,2 4233,4 4248,5 4461,6 4140 4138,7 4336,2 4328 4027,1 3832,9 4016,7 3998,4 4175,9 4232,5 4238,2 4467,5 4391,6 4465 4446,5 4352,6 4357 4206 4157,1 3939 3531,9 3865,4 3685,7 3578,9 3802 3925,7 3917,5 3926,5 3655,8 3514,6 3539,8 3537,2 3589,3 3725,7 3768,6 3863 4098,3 4232,6 4154,2 4213,3 4072,2 3881,1 3995,3 4105,9 9/30/2013 10/31/2013 11/29/2013 12/31/2013 1/31/2014 2/28/2014 3/31/2014 4/30/2014 5/30/2014 6/30/2014 7/31/2014 8/29/2014 9/30/2014 10/31/2014 11/28/2014 12/31/2014 1/30/2015 2/27/2015 3/31/2015 4/30/2015 5/29/2015 6/30/2015 7/31/2015 8/31/2015 9/30/2015 10/30/2015 11/30/2015 12/31/2015 1/29/2016 2/29/2016 3/31/2016 4/29/2016 5/31/2016 6/30/2016 7/29/2016 8/31/2016 9/30/2016 10/31/2016 11/30/2016 12/30/2016 1/31/2017 5218,9 5425,5 5320 5352,2 5190 5404,8 5394,8 5489,1 5492,5 5395,7 5632,9 5625,9 5292,8 5526,6 5313 5411 5588,3 5928,8 5891,5 5790 5777,2 5459 5699,2 5207 5021,6 5239,4 5166,5 5295,9 5005,5 4880,9 5082,8 5252,2 5378,6 5233,4 5562,4 5433 5435,9 5317,7 5440,5 5665,8 5620,9 4228,5 4317,2 4247,8 4349,5 4219,1 4486,5 4482,1 4555,8 4585,3 4515,8 4721,2 4738,3 4433,4 4628,1 4583,9 4747,5 4911,3 5187,9 5269,8 5181,2 5294,2 4831,5 5103,9 4835,2 4720,7 5054,7 5018,2 5107,3 4924,4 4967 5200,4 5318,7 5615,4 5479,5 5935,1 5904,9 5796,5 5545,6 5582,1 5799,2 5803,2 Australian Real Estate ASX200 REITS NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA US large equities S&P 500 (in AU dollars) 649,46 637,5 638,73 621,85 650,19 682,81 650,32 691,06 717,07 702,3 702,41 687,24 679,07 655,4 635,94 632,01 618,36 608,06 620,15 638,7 625,26 636,49 590,37 592,1 621,4 661 682,64 707,25 741,07 768,52 760,31 746,32 774,28 764,47 814,23 828,01 854,02 837,55 825,22 831,99 838,02 852,08 828,06 824,02 868,66 889,34 929,53 932,62 NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA 1231,33 1254,71 1264,82 1277,02 1307,94 1288,23 1276,88 1266,57 1292,23 1340,21 1313,88 1314,67 1031,4 1018,93 965,91 1025,21 1114,33 1181,53 1280,82 1224,7 1308,15 1297,53 1396,24 1489,38 1430,31 1540,33 1661,38 1705,19 1741,55 1831 1845,41 1672,85 1717,2 1765,6 1850,56 2004,09 2036,85 1994,32 2037,01 2014,59 2006,64 2073,82 2034,75 2072,34 1965,46 2138,79 2184,92 2245,4 2186,45 2224,86 2468,86 2489,12 2490,11 2422,64 2471,21 2626,58 2652,56 2758,59 2501,06 2376,12 2487,54 2365,54 1287,55 1294,9 1309,97 1348,1 1358,8 1388,8 1375,3 1421 1417,1 1424,8 1403,9 1391,5 1397,8 1419,33 1458,3 1439,68 1414,06 1414,18 1427,1 1452,74 1479,55 1479,73 1485,14 1424,63 1478,68 1494 1564,71 1498,64 1503,02 1456,66 1409,7 1435,46 1470,62 1494,53 1497,29 1518,95 1564,15 1548,21 1636,75 1630,27 1657,45 1679,99 1688,29 1722,66 1773,47 1836,38 1848,26 1780,56 1748,91 1752,55 2376,4 2446,35 2477,52 2409,75 2387,79 2155,09 2109,29 2100,25 2190,77 2242,84 2230,5 2144,22 2149,9 2005,68 1885,21 1763,2 1674,96 1663,01 1500,49 1595,9 1667,85 1562,46 1459,74 1386,13 1403,59 1465,77 1478,68 1453,06 1528,02 1557,38 1471,47 1480,79 1462,42 1475,77 1486,26 1483,96 1475,13 1533,25 1570,47 1637,71 1573,2 1563,74 1538,75 1513,09 1512,86 1546 1524,32 1516,17 1526,19 1481,63 1744,93 1798,63 1839,01 1848,57 1842,47 1808,06 1865,85 1931,88 1909 1956,22 1935,98 1931,11 1901,17 1987,72 2041,19 2098,69 2167,9 2183,75 2299,57 2430,99 2488,7 2452,7 2342,25 2424,95 2523,14 2364,11 2251,13 2417,77 2464,66 2449,05 2293,73 2111,16 1817,2 1708,01 1703,45 1776,08 1612,82 1410,57 1340,49 1459,2 1369,19 1022,85 1025,38 899,54 812 666,79 663,47 703,75 729,4 749,03 1572,21 1562,89 1623,83 1624,62 1609,14 1615,49 1688,14 1701,73 1692,23 1723,97 1815,92 1727,34 1685,26 1709,66 1666,01 1707,34 1790,07 1780,61 1774,21 1799,41 1856,77 1785,42 1758,81 1780,94 1849,38 1771,97 1698,48 1811,82 1725,26 1671,84 1674,74 1672,28 1544,76 1422,51 1448,98 1470,34 1468,72 1333,8 1347,48 1489,57 1478,65 1468,34 1376,29 1295,56 1298,77 1150,67 1148,33 1187,99 1148,28 1137,15 767,02 875,33 958,54 871,9 879,53 897,3 871,32 869,51 867,59 899,85 862,44 843,53 851,83 873,64 864,2 859,44 841,78 839,84 859,85 879,1 860,9 862,71 861,67 842,82 787,06 800,12 762,85 790,85 811,7 777,52 819,35 826,67 820,13 865,18 853,31 877,11 926,21 914,4 926,38 974,46 961,41 973,83 1015,49 1041,31 1013,44 1096,96 1055,18 1029,75 1021,38 1008,79 1187,82 1210,62 1197,76 1146,74 1196,97 1239,92 1208,14 1233,41 1274,09 1274,84 1298,86 1220,27 1216,89 1178,95 1178,61 1207,16 1230,96 1226,91 1289,97 1303,4 1282,03 1246,05 1262,45 1233,57 1176,48 1138,16 1164,14 1181,28 1213,82 1226,69 1234,94 1263,99 1359,59 1342,77 1350,94 1328,85 1310,7 1361,06 1385,4 1361,84 1357,46 1373,72 1436,27 1479,5 1505,17 1539,01 1700,93 1754,81 1878,31 1833,44 1018,59 1045,54 1016,61 984,9 989,23 1021,94 1005,33 1062,67 1063,25 1069,65 1122,78 1141,57 1080,16 1153,43 1152,58 1186,17 1277,28 1313,88 1286,26 1272,26 1309,4 1235,51 1305,73 1241,47 1237,82 1299,15 1261,12 1291,22 1304,65 1330,53 1362,05 1400,22 1437,09 1467,2 1546,38 1492,71 1427,4 1315,28 1326,36 1395,42 1327,27 1798,36 1854,94 1976,03 2066,03 2043,07 2077,98 2020,13 2033,29 2066,81 2076,82 2076,71 2141,97 2253,87 2295,88 2422,44 2515,91 2561,78 2688,64 2706,78 2644,02 2753,16 2684,26 2864,89 2781,83 2734,12 2914,52 2871,15 2809,29 2743,01 2705,21 2677,6 2706,29 2894,54 2818,81 2859,88 2888,69 2833,44 2794,09 2975,98 3091,86 3001,87 Australian government bonds AU government bonds 3 YEAR (YTM, per annum in percentage AU government term)bonds 7 YEAR (YTM, per annum in percentage term) 7,342 8,441 6,829 7,725 6,541 7,529 6,194 7,243 6,529 7,389 6,103 7,05 5,803 6,674 5,639 6,414 5,82 6,597 5,655 6,253 6,031 6,593 5,815 6,428 5,582 6,267 6,254 6,96 7,082 7,849 7,38 8,287 7,383 8,561 8,385 9,447 8,291 9,334 8,387 9,19 9,174 10,086 9,508 10,339 9,951 10,416 10,089 10,075 10,209 10,364 9,308 9,753 9,179 9,69 8,936 9,489 7,829 8,528 8,218 8,809 8,465 9,233 7,975 8,798 7,706 8,393 7,948 8,589 7,349 8,013 7,382 7,963 7,325 7,874 7,928 8,45 8,4 8,82 8,188 8,61 8,355 8,75 8,298 8,77 7,416 8,129 7,157 7,878 6,933 7,6 6,61 7,219 6,549 7,05 6,405 7,213 6,539 6,89 7,142 6,759 6,157 5,843 5,495 5,375 5,082 5,264 5,601 5,482 5,295 5,283 5,067 5,148 4,8 5,206 5,103 5,76 4,648 4,401 4,623 4,634 4,693 5,123 4,987 4,987 5,418 5,548 5,439 5,654 5,588 6,053 6,134 6,394 6,756 6,466 6,334 6,373 6,127 5,967 6,233 6,363 6,204 6,086 5,694 5,243 4,792 4,769 7,324 7,573 7,872 7,659 7,244 6,836 6,22 6,326 5,927 5,774 6,023 5,877 5,721 5,831 5,611 5,734 5,247 5,499 5,417 5,87 4,947 4,768 4,934 4,922 4,933 5,428 5,332 5,361 5,833 6,15 6,014 6,177 6,128 6,504 6,536 6,816 7,086 6,66 6,405 6,465 6,234 6,085 6,251 6,29 6,215 6,157 5,753 5,423 5,187 5,097 4,676 4,991 5,2 5,579 5,681 4,979 4,465 4,168 4,667 4,994 5,28 5,273 5,69 5,376 5,776 5,614 5,352 5,218 4,931 4,848 4,965 4,509 4,516 4,326 4,599 4,613 4,391 4,419 4,742 4,972 4,968 5,53 5,814 5,352 5,527 5,316 5,109 5,48 5,292 5,33 5,376 5,274 5,227 5,115 4,912 5,047 5,235 5,505 5,556 5,208 5,076 5,519 5,767 5,927 5,993 5,405 5,246 4,921 5,378 5,791 5,88 5,809 6,183 5,92 6,15 5,931 5,792 5,622 5,227 5,38 5,5 4,975 4,993 4,827 5,089 5,058 4,718 4,815 5,19 5,326 5,249 5,693 5,942 5,583 5,809 5,539 5,444 5,885 5,785 5,805 5,79 5,495 5,395 5,31 5,14 5,265 5,35 5,541 5,63 5,314 5,135 5,083 5,112 4,975 5,278 5,345 5,275 5,196 5,274 5,253 5,329 5,643 5,684 5,77 5,957 5,783 5,736 6,018 5,931 6,095 6,093 5,925 6,193 6,112 6,241 6,441 6,396 6,205 6,443 6,696 6,482 6,896 6,628 6,693 6,203 6,374 6,729 6,71 6,165 5,646 5,085 4,476 3,554 3,032 2,634 3,23 3,384 3,433 3,95 4,563 5,139 5,094 5,104 5,004 5,346 5,468 5,366 5,206 5,346 5,285 5,399 5,694 5,704 5,767 5,854 5,709 5,587 5,791 5,717 5,98 6,019 5,791 6,025 5,98 6,1 6,336 6,202 6,067 6,324 6,268 6,066 6,384 6,142 6,28 6,087 6,28 6,561 6,476 6,208 5,7 5,273 4,893 4,157 3,613 3,543 4,009 4,075 4,391 5,104 5,404 4,792 4,935 4,826 5,04 4,612 4,67 4,513 4,551 5,271 5,297 4,703 4,432 4,562 4,239 4,78 4,922 5,055 5,23 5,086 5,125 4,986 5,078 4,865 4,756 4,36 3,797 3,555 3,879 3,082 3,129 3,164 3,628 3,489 3,02 2,158 2,442 2,589 2,499 2,353 2,551 2,618 2,69 2,826 2,663 2,855 2,552 2,584 2,74 2,527 2,681 5,538 5,346 5,299 5,468 5,171 5,522 5,267 5,319 5,644 5,615 5,19 4,899 4,987 4,594 4,927 5,105 5,288 5,419 5,37 5,468 5,385 5,374 5,149 4,962 4,619 4,143 3,927 4,244 3,53 3,41 3,459 3,83 3,782 3,373 2,601 2,779 2,776 2,747 2,623 2,797 2,861 3,044 3,227 3,076 3,208 2,924 3,098 3,406 3,322 3,505 2,768 2,785 2,891 2,797 2,613 2,648 2,808 3,021 2,851 2,703 2,71 2,655 2,732 2,561 2,391 2,145 1,954 1,822 1,736 1,918 1,882 2,02 1,873 1,746 1,808 1,809 2,118 2,032 1,845 1,73 1,9 1,857 1,681 1,596 1,533 1,401 1,492 1,709 1,905 1,998 1,848 3,551 3,525 3,742 3,691 3,487 3,531 3,583 3,643 3,385 3,252 3,224 3,076 3,213 3,013 2,752 2,44 2,141 2,126 1,994 2,271 2,462 2,696 2,45 2,322 2,372 2,316 2,557 2,489 2,279 2,111 2,223 2,3 2,079 1,84 1,733 1,681 1,736 2,063 2,423 2,439 2,364 AU 13-week treasury notes AU 13 week treasury notes (per annum, in percentage term) 5,5848 5,527776 4,974984 4,936752 4,994088 4,96542 4,687944 4,553748 4,659204 4,553748 4,601688 4,64004 4,572924 4,611276 4,630452 4,611276 4,678368 5,270784 5,327952 5,489748 5,84106 6,493224 7,122804 7,897752 8,027928 7,636932 7,599624 7,692876 7,225824 7,253904 7,207104 7,244544 7,235184 7,225824 7,094688 7,029072 7,113432 7,207104 7,16028 7,113432 7,150908 7,150908 6,71916 6,578004 6,559176 6,342348 6,125088 5,717748 5,499252 5,736732 5,774676 5,651304 5,204064 5,108664 4,764564 4,754988 4,553748 4,745412 4,81242 4,869816 4,850688 4,821984 4,81242 4,745412 4,83156 4,888944 4,83156 4,850688 4,745412 4,601688 4,601688 4,476984 4,553748 4,572924 4,572924 4,53456 4,582512 4,5921 4,5921 4,64004 4,668792 4,764564 4,898508 4,927188 5,261256 5,518272 5,53728 5,698776 5,84106 5,708268 5,755704 6,181812 6,2196 6,106176 6,058884 5,926344 5,651304 5,404116 4,984536 4,659204 4,697532 4,735836 4,802856 4,72626 4,361736 4,159764 4,101996 4,063464 4,0634604 4,1308848 4,2559908 4,400166 4,6112808 4,8124212 4,7166864 4,6975296 4,6592052 4,620864 4,601688 4,601688 4,592106 4,5825168 4,5825168 4,601694 4,601694 4,4673828 4,5345588 4,649622 4,6975296 4,7549904 5,0704872 5,1945252 5,2612572 5,2612572 5,2040616 5,2040616 5,2040616 5,1754524 5,1849888 5,1849888 5,1659136 5,1659136 5,1754524 5,1563748 5,1659136 5,3565168 5,5372836 5,4707208 5,4136332 5,404116 5,404116 5,3945976 5,3945976 5,404116 5,404116 5,404116 5,404116 5,3945976 5,3945976 5,480232 5,6512992 5,7177528 5,8126176 5,9168736 5,935818 6,0210312 6,1250892 6,1439976 6,181806 6,134544 6,191256 6,238494 6,134544 6,191256 6,2196012 6,361218 6,3706524 6,4932288 6,6439044 6,6533148 6,7003536 7,01031 7,0946916 7,0946916 7,1134344 7,1321736 7,0853196 6,7473732 6,5026524 5,1468348 4,20789 3,6290256 3,144288 2,5988208 2,7451944 2,7354432 2,852412 2,9108496 2,930322 3,0470832 3,1151364 3,5516124 3,6386988 3,774696 3,901956 3,8247348 4,0851372 4,3088772 4,4289792 4,4337804 4,462584 4,4169744 4,5273636 4,541754 4,6855548 4,6831596 4,675974 4,675974 4,6544136 4,6687872 4,7286576 4,6783692 4,6184712 4,3136832 4,3208928 4,3401156 4,1429208 3,9767112 3,9925 4,1 4,1775 3,925 3,3925 3,1975 3,2925 3,39 3,35 3,0675 3,075 2,9625 2,93 2,88 2,93 2,84 2,65 2,81 2,79 2,61 2,58 2,58 2,58 2,60 2,61 2,61 2,625 2,655 2,68 2,6875 2,6975 2,65 2,56 2,67 2,53 2,51 2,30 2,15 1,89 1,83 1,84 1,95 1,96 1,95 1,91 1,97 1,98 1,95 1,94 1,96 1,93 1,70 1,66 1,61 1,56 1,54 1,55 1,48 1,46 1,49 1,48 US 13-week treasury notes US government bond per annum, in percentage term 2,9 2,95 2,89 2,91 3,06 3,03 3,03 3,01 2,92 3,03 3,14 3,01 2,96 3,36 3,48 3,87 4,16 4,15 4,27 4,56 4,67 5,03 5,56 5,53 5,83 5,76 5,7 5,69 5,63 5,44 5,42 5,29 5,24 5,32 5,32 4,96 4,91 4,89 5 5,01 5,04 5,04 5,18 5,15 4,91 5,03 5 5,07 US 5-year (YTM, per annum in percentage term) 5,536 5,181 5,227 5,142 5,315 5,017 5,121 4,733 4,741 4,795 5,099 5,173 4,994 5,579 6,229 6,627 6,764 6,952 6,697 6,792 7,278 7,462 7,799 7,827 7,553 7,097 7,086 6,894 6,072 5,979 6,16 6,074 6,045 5,838 5,544 5,402 5,269 5,708 6,078 6,393 6,651 6,472 6,559 6,724 6,466 6,0915 5,8382 6,212 5,02 5,09 5,21 5,14 4,82 5,06 5,11 5,1 4,93 5,07 5,08 5,22 5,06 5,18 5,02 4,87 4,89 4,97 4,97 4,77 4,26 4,23 4,42 4,37 4,37 4,55 4,37 4,43 4,53 4,65 4,62 4,84 4,74 4,97 5,15 5,17 5,53 5,62 5,72 5,66 5,48 5,71 6,03 6,13 6,05 6,19 6,03 5,73 4,86 4,73 6,256 6,388 6,777 6,568 6,506 6,399 5,905 6,195 5,986 5,742 5,864 5,71 5,401 5,599 5,646 5,652 5,56 5,49 5,497 4,938 4,214 4,226 4,509 4,548 4,552 5,2094 5,1037 5,2212 5,6143 5,6528 5,7896 5,8615 5,7554 5,9332 6,0978 6,3356 6,6856 6,5935 6,3244 6,5439 6,5819 6,1707 6,1403 5,9725 5,8395 5,8046 5,4825 5,0827 4,812 4,6648 4,2 3,86 3,55 3,57 3,46 3,3 2,35 2,01 1,75 1,71 1,73 1,76 1,76 1,74 1,71 1,67 1,68 1,66 1,54 1,42 1,2 1,2 1,16 1,18 1,12 1,11 1,09 0,89 0,94 0,96 0,93 0,94 0,91 0,93 0,9 0,94 0,93 0,96 1,06 1,31 1,42 1,57 1,68 1,87 2,2 2,18 2,48 2,72 2,73 2,84 4,5561 4,8882 4,9461 4,9414 4,5109 4,3951 3,7905 3,52 3,994 4,3358 4,3711 4,191 4,8229 4,413 4,2269 4,0571 3,4513 3,1479 2,5747 2,7292 3,2639 2,7048 2,9583 2,6026 2,743 2,7697 2,1887 2,4229 3,2888 3,3522 2,7866 3,2272 3,3285 3,1979 3,1313 2,9245 2,7605 3,5933 3,7796 3,7952 3,6783 3,3026 3,3611 3,2839 3,6959 3,6076 3,6901 4,0096 4,175 3,8933 2,93 3,06 3,34 3,44 3,47 3,89 3,86 3,99 4,37 4,51 4,52 4,65 4,74 4,87 4,97 4,92 4,77 4,95 4,9 4,89 4,99 5,01 4,9 4,79 4,6 4,68 4,82 3,91 3,72 3,84 3,08 3,29 1,92 1,81 1,36 1,41 1,85 1,87 1,65 1,69 0,9 0,44 0,01 0,11 0,24 0,26 0,21 0,14 0,14 0,19 3,7645 3,7424 4,1271 3,8706 4,2242 4,4811 4,497 4,3777 4,5067 4,6062 4,8323 4,9305 5,0276 5,1065 4,912 4,6993 4,6026 4,5725 4,4542 4,7054 4,8218 4,5027 4,5355 4,5116 4,8515 4,9326 4,5977 4,2585 4,2276 4,1628 3,4134 3,4613 2,8078 2,4929 2,466 3,0375 3,4006 3,3325 3,2696 3,0703 2,9766 2,7687 1,9659 1,5476 1,8126 1,9876 1,6766 2,0168 2,3476 2,5555 0,18 0,15 0,14 0,05 0,06 0,06 0,08 0,13 0,16 0,16 0,16 0,18 0,15 0,14 0,16 0,12 0,17 0,12 0,15 0,15 0,09 0,04 0,06 0,03 0,1 0,02 0,02 0,01 0,01 0,02 0,06 0,08 0,07 0,1 0,07 0,09 0,11 0,09 0,1 0,11 0,08 0,05 0,07 0,11 0,07 0,05 0,04 0,04 0,04 0,03 2,5305 2,388 2,3148 2,2768 1,9987 2,6838 2,3287 2,3012 2,5492 2,4122 2,092 1,7746 1,5938 1,3329 1,269 1,1431 1,432 1,99 1,918 2,106 2,194 1,937 1,649 1,715 1,337 0,912 0,937 0,987 0,928 0,813 0,69 0,856 1,027 0,788 0,651 0,722 0,591 0,584 0,608 0,7 0,604 0,6964 0,8608 0,7523 0,7429 0,662 1,0366 1,3649 1,3739 1,5728 0,02 0,04 0,06 0,07 0,02 0,05 0,05 0,03 0,04 0,04 0,03 0,03 0,02 0,01 0,02 0,04 0,02 0,02 0,03 0,01 0,01 0,01 0,08 0,08 0,08 0,08 0,22 0,16 0,32 0,33 0,21 0,22 0,34 0,26 0,27 0,33 0,28 0,34 0,48 0,5 0,52 1,3615 1,2924 1,3525 1,706 1,487 1,4942 1,7116 1,6636 1,5045 1,6048 1,7568 1,6203 1,7702 1,6106 1,5068 1,6365 1,1492 1,5007 1,3672 1,4267 1,4797 1,6298 1,5259 1,5491 1,3302 1,5137 1,6559 1,6474 1,3348 1,2371 1,2089 1,2793 1,387 0,9958 1,0326 1,1896 1,1454 1,3229 1,8627 1,9176 1,9207 US government bond US 10-year (YTM, per annum in percentage term) 6,37 6,088 6,026 6,037 6,142 5,775 5,805 5,476 5,388 5,41 5,798 5,795 5,647 6,208 6,758 7,043 7,168 7,326 7,097 7,191 7,605 7,8 7,919 7,835 7,595 7,217 7,197 7,053 6,327 6,201 6,431 6,31 6,158 6,009 5,779 5,575 5,589 6,159 6,331 6,643 6,844 6,713 6,791 6,942 6,701 6,368 6,045 6,417 6,508 6,597 6,919 6,713 6,648 6,504 6,011 6,377 6,108 5,821 5,87 5,738 5,515 5,695 5,668 5,673 5,58 5,436 5,497 5,035 4,413 4,611 4,728 4,647 4,6581 5,2778 5,2385 5,3545 5,7156 5,8077 5,9048 6,0349 5,8867 6,0093 6,1657 6,4342 6,6668 6,543 6,0196 6,2189 6,2899 6,0228 6,0377 5,8819 5,797 5,7552 5,4459 5,1048 5,1565 5,0291 4,9345 5,3356 5,4054 5,4016 5,0394 4,9261 4,5784 4,269 4,7483 5,04 5,0306 4,9208 5,4127 5,0985 5,0436 4,8256 4,4649 4,1121 3,6036 3,9007 4,215 3,8284 3,977 3,6835 3,8246 3,8591 3,3375 3,5288 4,4764 4,3852 3,9383 4,2992 4,299 4,2637 4,1361 3,9656 3,8389 4,5015 4,637 4,6146 4,4746 4,1243 4,1178 4,0279 4,3638 4,2183 4,1349 4,3713 4,4973 4,2042 4,0297 3,9429 4,2826 4,0424 4,3262 4,5572 4,4998 4,3976 4,53 4,549 4,854 5,0709 5,1121 5,1374 4,987 4,7283 4,6316 4,6064 4,4621 4,71 4,8256 4,554 4,652 4,6316 4,8897 5,0327 4,7729 4,5406 4,5767 4,4674 3,9686 4,0342 3,636 3,5303 3,4306 3,7613 4,0449 3,9762 3,9795 3,8126 3,8237 3,9816 2,965 2,2512 2,8444 3,0439 2,6873 3,1252 3,4653 3,5196 3,4998 3,4 3,3047 3,384 3,1992 3,8353 3,5885 3,6125 3,8294 3,6573 3,293 2,9366 2,9068 2,4717 2,5047 2,603 2,796 3,308 3,381 3,416 3,453 3,296 3,049 3,157 2,804 2,213 1,928 2,174 2,068 1,875 1,802 1,978 2,218 1,916 1,581 1,658 1,489 1,563 1,636 1,685 1,616 1,75 1,9853 1,89 1,8509 1,6754 2,1612 2,4792 2,5925 2,7477 2,6161 2,5425 2,7565 3,007 2,6663 2,6611 2,7252 2,6483 2,4561 2,515 2,557 2,3455 2,5068 2,3346 2,1963 2,1709 1,6394 2,001 1,9272 2,0357 2,1223 2,3485 2,1866 2,2135 2,0342 2,145 2,2079 2,2695 1,9297 1,7401 1,7845 1,8192 1,8328 1,4912 1,4578 1,5673 1,6058 1,8337 2,3674 2,4467 2,4666 Date consumer price Quarterly index Change Yearly change 31/03/1981 27,8 30/06/1981 28,4 30/09/1981 29,0 31/12/1981 30,2 31/03/1982 30,8 30/06/1982 31,5 30/09/1982 32,6 31/12/1982 33,6 31/03/1983 34,3 30/06/1983 35,0 30/09/1983 35,6 31/12/1983 36,5 31/03/1984 36,3 30/06/1984 36,4 30/09/1984 36,9 31/12/1984 37,4 31/03/1985 37,9 30/06/1985 38,8 30/09/1985 39,7 31/12/1985 40,5 31/03/1986 41,4 30/06/1986 42,1 30/09/1986 43,2 31/12/1986 44,4 31/03/1987 45,3 30/06/1987 46,0 30/09/1987 46,8 31/12/1987 47,6 31/03/1988 48,4 30/06/1988 49,3 30/09/1988 50,2 31/12/1988 51,2 31/03/1989 51,7 30/06/1989 53,0 30/09/1989 54,2 31/12/1989 55,2 31/03/1990 56,2 30/06/1990 57,1 30/09/1990 57,5 31/12/1990 59,0 31/03/1991 58,9 30/06/1991 59,0 30/09/1991 59,3 31/12/1991 59,9 31/03/1992 59,9 30/06/1992 59,7 2,16% 2,11% 4,14% 1,99% 2,27% 3,49% 3,07% 2,08% 2,04% 1,71% 2,53% -0,55% 0,28% 1,37% 1,36% 1,34% 2,37% 2,32% 2,02% 2,22% 1,69% 2,61% 2,78% 2,03% 1,55% 1,74% 1,71% 1,68% 1,86% 1,83% 1,99% 0,98% 2,51% 2,26% 1,85% 1,81% 1,60% 0,70% 2,61% -0,17% 0,17% 0,51% 1,01% 0,00% -0,33% 10,79% 10,92% 12,41% 11,26% 11,36% 11,11% 9,20% 8,63% 5,83% 4,00% 3,65% 2,47% 4,41% 6,59% 7,59% 8,29% 9,23% 8,51% 8,82% 9,63% 9,42% 9,26% 8,33% 7,21% 6,84% 7,17% 7,26% 7,56% 6,82% 7,51% 7,97% 7,81% 8,70% 7,74% 6,09% 6,88% 4,80% 3,33% 3,13% 1,53% 1,70% 1,19% 30/09/1992 59,8 31/12/1992 60,1 31/03/1993 60,6 30/06/1993 60,8 30/09/1993 61,1 31/12/1993 61,2 31/03/1994 61,5 30/06/1994 61,9 30/09/1994 62,3 31/12/1994 62,8 31/03/1995 63,8 30/06/1995 64,7 30/09/1995 65,5 31/12/1995 66,0 31/03/1996 66,2 30/06/1996 66,7 30/09/1996 66,9 31/12/1996 67,0 31/03/1997 67,1 30/06/1997 66,9 30/09/1997 66,6 31/12/1997 66,8 31/03/1998 67,0 30/06/1998 67,4 30/09/1998 67,5 31/12/1998 67,8 31/03/1999 67,8 30/06/1999 68,1 30/09/1999 68,7 31/12/1999 69,1 31/03/2000 69,7 30/06/2000 70,2 30/09/2000 72,9 31/12/2000 73,1 31/03/2001 73,9 30/06/2001 74,5 30/09/2001 74,7 31/12/2001 75,4 31/03/2002 76,1 30/06/2002 76,6 30/09/2002 77,1 31/12/2002 77,6 31/03/2003 78,6 30/06/2003 78,6 30/09/2003 79,1 31/12/2003 79,5 31/03/2004 80,2 0,17% 0,50% 0,83% 0,33% 0,49% 0,16% 0,49% 0,65% 0,65% 0,80% 1,59% 1,41% 1,24% 0,76% 0,30% 0,76% 0,30% 0,15% 0,15% -0,30% -0,45% 0,30% 0,30% 0,60% 0,15% 0,44% 0,00% 0,44% 0,88% 0,58% 0,87% 0,72% 3,85% 0,27% 1,09% 0,81% 0,27% 0,94% 0,93% 0,66% 0,65% 0,65% 1,29% 0,00% 0,64% 0,51% 0,88% 0,84% 0,33% 1,17% 1,84% 2,17% 1,83% 1,49% 1,81% 1,96% 2,61% 3,74% 4,52% 5,14% 5,10% 3,76% 3,09% 2,14% 1,52% 1,36% 0,30% -0,45% -0,30% -0,15% 0,75% 1,35% 1,50% 1,19% 1,04% 1,78% 1,92% 2,80% 3,08% 6,11% 5,79% 6,03% 6,13% 2,47% 3,15% 2,98% 2,82% 3,21% 2,92% 3,29% 2,61% 2,59% 2,45% 2,04% 30/06/2004 80,6 30/09/2004 80,9 31/12/2004 81,5 31/03/2005 82,1 30/06/2005 82,6 30/09/2005 83,4 31/12/2005 83,8 31/03/2006 84,5 30/06/2006 85,9 30/09/2006 86,7 31/12/2006 86,6 31/03/2007 86,6 30/06/2007 87,7 30/09/2007 88,3 31/12/2007 89,1 31/03/2008 90,3 30/06/2008 91,6 30/09/2008 92,7 31/12/2008 92,4 31/03/2009 92,5 30/06/2009 92,9 30/09/2009 93,8 31/12/2009 94,3 31/03/2010 95,2 30/06/2010 95,8 30/09/2010 96,5 31/12/2010 96,9 31/03/2011 98,3 30/06/2011 99,2 30/09/2011 99,8 31/12/2011 99,8 31/03/2012 99,9 30/06/2012 100,4 30/09/2012 101,8 31/12/2012 102,0 31/03/2013 102,4 30/06/2013 102,8 30/09/2013 104,0 31/12/2013 104,8 31/03/2014 105,4 30/06/2014 105,9 30/09/2014 106,4 31/12/2014 106,6 31/03/2015 106,8 30/06/2015 107,5 Sep-2015 108,0 Dec-2015 108,4 0,50% 0,37% 0,74% 0,74% 0,61% 0,97% 0,48% 0,84% 1,66% 0,93% -0,12% 0,00% 1,27% 0,68% 0,91% 1,35% 1,44% 1,20% -0,32% 0,11% 0,43% 0,97% 0,53% 0,95% 0,63% 0,73% 0,41% 1,44% 0,92% 0,60% 0,00% 0,10% 0,50% 1,39% 0,20% 0,39% 0,39% 1,17% 0,77% 0,57% 0,47% 0,47% 0,19% 0,19% 0,66% 0,47% 0,37% 2,54% 2,28% 2,52% 2,37% 2,48% 3,09% 2,82% 2,92% 4,00% 3,96% 3,34% 2,49% 2,10% 1,85% 2,89% 4,27% 4,45% 4,98% 3,70% 2,44% 1,42% 1,19% 2,06% 2,92% 3,12% 2,88% 2,76% 3,26% 3,55% 3,42% 2,99% 1,63% 1,21% 2,00% 2,20% 2,50% 2,39% 2,16% 2,75% 2,93% 3,02% 2,31% 1,72% 1,33% 1,51% 1,50% 1,69% Mar-2016 108,2 Jun-2016 108,6 Sep-2016 108,9 Dec-2016 109,4 -0,18% 0,37% 0,28% 0,46% 1,31% 1,02% 0,83% 0,92% Name Code 1/31/2010 2/26/2010 3/31/2010 4/30/2010 5/31/2010 6/30/2010 7/30/2010 8/31/2010 9/30/2010 10/29/2010 11/30/2010 12/31/2010 1/31/2011 2/28/2011 3/31/2011 4/29/2011 5/31/2011 6/30/2011 7/29/2011 8/31/2011 9/30/2011 10/31/2011 11/30/2011 12/30/2011 1/31/2012 2/29/2012 3/30/2012 4/30/2012 5/31/2012 6/29/2012 7/31/2012 8/31/2012 9/28/2012 10/31/2012 11/30/2012 12/31/2012 1/31/2013 2/28/2013 3/29/2013 4/30/2013 5/31/2013 6/28/2013 7/31/2013 8/30/2013 9/30/2013 Price 21,73 23,14 25,36 24,2 22,31 21,61 23,05 22,59 23,68 24,81 22,66 23,35 23,67 24,13 23,81 24,23 22,13 22 20,83 20,29 19,52 21,68 19,9 20,53 21,41 21,95 23,26 23,91 20,9 22,03 23,54 24,82 24,75 25,45 24,36 25,05 26,58 28,72 28,53 31,84 27,54 28,58 29,76 29,69 30,78 ANZ CSL PE ratio Dividend yield Market Value Price PE ratio Dividend yield Market Value 12,8 4,69 55042,5 31,18 16,2 2,25 18170,99 13,6 4,41 58615,07 34,39 16,1 2,18 20041,71 14,9 4,02 64243,83 36,43 17,1 2,06 21118,43 14,2 4,46 61311,14 32,39 15,2 2,32 18664,17 13,1 4,84 56527,34 31,63 14,8 2,37 18187,84 12,7 5 54754,43 32,58 15,3 2,3 17908,85 13,5 4,69 58988,83 33,14 15,5 2,26 18216,86 13,3 4,78 57814,59 32,96 17,7 2,43 18123,7 13,9 4,56 60612,32 33,05 17,8 2,42 18176,42 14,6 5,08 63507,82 32,83 17,7 2,44 18060,43 13,3 5,56 58040,36 34,91 18,8 2,29 19130,07 13,7 5,4 60616,21 36,29 19,5 2,2 19816,62 13,9 5,32 61447,37 37,21 20 2,15 20267,52 14,2 5,22 62643,89 35,6 20,8 2,25 19390,98 14 5,29 61820,6 35,73 20,9 2,24 19337,17 14,2 5,2 62913,78 34,35 20,1 2,33 18458,33 10,7 6,24 57467,78 33,9 19,8 2,36 18045,52 10,7 6,27 57139,16 33,06 19,3 2,42 17454,38 10,1 6,63 54759,59 30,69 18 2,61 16203,11 9,8 6,8 53340,4 28,12 16,2 2,88 14846,25 9,5 7,07 51318,66 29,68 17,1 2,8 15581,9 10,5 6,37 57003,66 28,86 16,6 2,88 15151,46 9,6 7,04 52432,04 31,19 17,9 2,66 16377,28 9,9 6,82 54996,46 32 18,4 2,59 16636,63 10,3 6,54 57359,36 31,13 17,9 2,67 16167,74 10,5 6,38 58806,8 32,78 18,8 2,53 17025,61 11,2 6,02 62325,43 35,89 20,5 2,31 18541,64 11,5 5,86 64067,25 36,66 21 2,26 18861,21 9,7 6,79 56003,34 37,65 21,5 2,2 19264,8 10,3 6,45 59033,56 39,42 22,6 2,11 20073,24 11 5,61 63927,99 42,7 24,4 1,94 21632,35 11,6 5,32 67411,44 44,43 23,5 1,87 22462,61 11,5 5,33 67253,75 46 24,3 1,8 23243,05 11,9 5,7 69159,81 47,5 25,1 1,75 23882,63 11,4 5,95 66224,88 51,7 27,3 1,61 25933,79 11,7 5,79 68726,81 53,9 28,5 1,54 26882,94 12,5 5,46 72924,63 54,94 29 1,51 27370,96 13,5 5,05 78796,25 60 27,7 1,59 29891,95 13,4 5,08 78278,44 59,23 27,3 1,62 29459,25 15,1 4,77 87360,81 62,96 29 1,52 31179,85 13 5,52 75568 59,6 27,5 1,61 29310,91 13,5 5,32 78331,19 61,58 28,4 1,55 30056,37 14,1 5,11 81646,06 66,07 30,5 1,45 32182,15 14,1 5,12 81456,44 67,99 28,5 1,55 33117,86 14,6 4,94 84448,38 64 26,8 1,81 31178,57 10/31/2013 11/29/2013 12/31/2013 1/31/2014 2/28/2014 3/31/2014 4/30/2014 5/30/2014 6/30/2014 7/31/2014 8/29/2014 9/30/2014 10/31/2014 11/28/2014 12/31/2014 1/30/2015 2/27/2015 3/31/2015 4/30/2015 5/29/2015 6/30/2015 7/31/2015 8/31/2015 9/30/2015 10/30/2015 11/30/2015 12/31/2015 1/29/2016 2/29/2016 3/31/2016 4/29/2016 5/31/2016 6/30/2016 7/29/2016 8/31/2016 9/30/2016 10/31/2016 11/30/2016 12/30/2016 1/31/2017 33,84 31,9 32,23 30,13 32,14 33,06 34,47 33,49 33,34 33,97 33,43 30,92 33,5 31,92 32,09 33 35,34 36,64 33,99 33,19 32,2 32,68 27,93 27,08 27,21 27,15 27,93 24,18 22,4 23,46 24,27 25,48 24,12 25,84 26,9 27,63 27,85 28,41 30,42 29,29 14,6 13,8 13,9 13 13,9 14,3 14,9 13,6 13,5 13,7 13,5 12,5 12,5 11,9 12 12,4 13,2 13,7 12,7 12,3 11,9 12,1 10,3 10 10 10 10,3 8,9 8,2 8,6 8,9 10,7 10,1 10,9 11,3 11,6 11,7 14,4 15,4 14,8 5,14 5,45 5,4 5,77 5,41 5,26 5,05 5,2 5,22 5,12 5,2 5,63 5,31 5,58 5,55 5,39 5,04 4,86 5,24 5,45 5,62 5,54 6,48 6,68 6,65 6,67 6,48 7,49 8,08 7,72 7,46 6,87 7,26 6,77 6,51 6,33 6,28 5,63 5,26 5,46 92845,56 87523,56 88441,38 82679,63 88195,31 90720,38 94589,56 91900,88 91489,25 93641,38 92153,06 85234,75 92346,81 87991,38 88460,63 91277,19 97749,56 101345,4 94015,56 91802,75 89064,44 91329,5 80310,88 78605,38 78982,75 78809,06 81487,38 70546,5 65353,32 68445,94 70809,19 74339,38 70371,5 75641,81 78744,75 80886,13 81530,13 83169,56 89314,13 85996,44 69,5 68,73 68,96 70,26 72,2 69,56 68,43 70,59 66,55 67,8 73,87 74,17 80,19 82,57 86,68 87,95 92,24 92,12 90,98 93,5 86,47 98,96 91,87 89,2 93,79 100,11 105,31 104 102,72 101,44 105,18 115,76 112,18 118 108,1 107 100,51 98 100,41 112,3 29,1 28,8 28,9 29,4 27,6 26,6 26,2 27 25,4 25,9 25 25,1 27,1 27,9 29,3 29,8 29,2 29,2 28,8 29,6 27,4 31,3 26 25,3 26,6 28,3 29,8 29,4 26,2 25,8 26,8 29,5 28,6 30 29,2 28,9 27,2 26,5 27,1 30,4 1,67 1,69 1,68 1,65 1,6 1,67 1,69 1,64 1,74 1,71 1,67 1,88 1,74 1,69 1,61 1,58 1,51 1,51 1,53 1,49 1,61 1,41 1,79 1,92 1,83 1,71 1,63 1,65 1,67 1,69 1,63 1,48 1,53 1,45 1,57 1,59 1,69 1,74 1,69 1,52 33851,31 33461,93 33423,25 34054,17 34953,02 33640 32892,45 33806,43 31823,63 32177,07 35057,82 35196,9 38050,39 39228,19 41131,77 41678,98 43712,06 43302,01 42552,64 43580,78 40270,75 45999,84 42705,27 41472,49 43616,5 46536,5 48750,67 48132,34 47544,77 46961,95 48162,77 52960,91 51321,04 53865,06 49345,9 48831,77 45824,53 44683,96 45783,73 51143,84 Market Value Executive Summary This report aims to provide the client reasonable investment planning to meet his requirements. First, we analysis the performance of each asset class and examine three appropriate SAA portfolios (growth, balanced and capital stable). Second, we create an investment policy statement of the client and recommend him an investment portfolio. Monash University 1. BFF5935 Portfolio Management and Theory Strategy Asset Allocation (SAA) For this part, assume all investments are at benchmark. Do not take into consideration the impact of any active investments. For simplicity, do not consider taxes and transaction costs on any income generated. 1.1 Analyse the performance of each asset class Chart 1.1 The Cumulative Return Between 1993 and 2016 Through the graph, it’s easy to find all the asset classes cumulating return are increasing between 1993 and 2016. However, some asset classes’ cumulating return are changing strongly during this period, such as Australian Equities S&P/ASX 200, Australian Equities S&P/ASX MIDCAP 50 and US large equities.  The relationship between Australian Equities S&P/ASX 200, Australian Equities S&P/ASX MIDCAP 50 and US large equities 1 Monash University BFF5935 Portfolio Management and Theory Between 1993 and 2016, the return of Australian Equities S&P/ASX 200, Australian Equities S&P/ASX MIDCAP 50 and US large equities changed strongly. During the second half of 1996 and the end of March 2000, the return of US large equities raised sharply and reached the peak. However, after the end of March 2000, the return of US large equities decreased strongly. After the end of 2002, the returns of US large equities gradually smooth, although the return still fluctuated, but the return changed smaller than before. At the same time, the trend of Australian Equities S&P/ASX 200 and Australian Equities S&P/ASX MIDCAP 50 return are similar. Between the end of 2002 and the end of March 2007, both of them increased quickly and reached the first peak. Yet during the end of March 2007 to the end of November 2008, both returns went down sharply. After one year the return of Australian Equities S&P/ASX 200 and Australian Equities S&P/ASX MIDCAP 50 return reached the second peak. After that, both returns went up volatility. Table 1.1 The correlation between Australian Equities S&P/ASX 200, Australian Equities S&P/ASX MIDCAP 50 and US large equities Through the list, the relationship between the return of Australian Equities S&P/ASX 200, Australian Equities S&P/ASX MIDCAP 50 and US large equities are positive. Especially, the return of Australian Equities S&P/ASX 200 and Australian Equities S&P/ASX MIDCAP 50 have a strongly positive relationship.  The relationship between AU government bonds 3 YEAR, AU government bonds 7 YEAR and US 5-year government bond A government bond is a bond issued by a national government, generally with a promise to pay periodic interest payments and to repay the face value on the maturity date. 2 Monash University BFF5935 Portfolio Management and Theory Typically, government bond yield is very stable and the risk is low, but the government bond return is often less than other asset classes. The longer government bond has higher bond yields, but it also means that the risk is bigger than the short-term government bond. During all the period, the return of AU government bonds 3 YEAR, AU government bonds 7 YEAR and US 5-year government bond always keep a stable growth. However, the return of them obviously lower than other asset classes such as Australian Equities S&P/ASX 200 and Australian Equities S&P/ASX MIDCAP 50. At the same time, the return of AU government bonds 7 YEAR higher than AU government bonds 3 YEAR and US 5-year government bond, because the AU government bonds 7 YEAR is the longest term government bond in these three government bonds. Table 1.2 The correlation between US 5-YEAR government bonds, AU government bonds 3 YEAR and AU government bonds 7 YEAR Through the list, it is easy to find all three asset classes had a really strong positive relationship. Between the return of AU government bonds 3 YEAR and AU government bonds 7 YEAR, they are close to complete positive correlation relationship.  The relationship between AU 13-week treasury notes and US 13-week treasury notes Treasury note is a medium-term or long-term bond issued by the government. Typically, treasury note yield is also very stable and the risk is low, but the treasury notes return is often less than the government bond. Between 1993 and 2016, both two treasury notes were stable increased, however, the return of these two much lower than the return of AU government bonds 3 YEAR, AU government bonds 7 YEAR and US 5-year government bond. 3 Monash University BFF5935 Portfolio Management and Theory Table 1.3 The correlation between AU 13-week treasury notes and US 13-week treasury notes It is obvious to find that the relationship between AU 13-week treasury notes and US 13-week treasury notes are strongly positive. 1.2 Asset allocation decisions in detail. Table 1.4 Arithmetic means of total asset classes Through the question 1 and the list, it is obvious to find the client would like to invest Australian Equities of S&P/ASX MIDCAP 50, US large equities of S&P 500, AU government bonds 7 YEAR and AU 13-week treasury notes. Table 1.5 The percentages of three appropriate SAA portfolios It is easy to find that Australian Equities of S&P/ASX MIDCAP 50 and US large equities of S&P 500 are growth assets, AU government bonds 7 YEAR and AU 13-week treasury notes are defensive assets. If Andrew Utley would like to earn high return, the growth and balanced portfolio he may choose. In the growth portfolio, Utley would invest 15% of all financial assets in Australian Equities of S&P/ASX MIDCAP 50, 55% in US large equities of S&P 500, 15% in AU government bonds 7 YEAR and 15% in AU 13-week treasury notes. In the balanced portfolio, the client would invest 15% of all financial assets in 4 Monash University BFF5935 Portfolio Management and Theory Australian Equities of S&P/ASX MIDCAP 50, 50% in US large equities of S&P 500, and he would invest more in U government bonds 7 YEAR, at 20% and still invests AU 13-week treasury note at 15%. If the client would like to keep lower risk, he would better choose capital stable portfolio. In the capital stable portfolio, the total percentage of growth assets are 40% (15% at Australian Equities of S&P/ASX MIDCAP 50, 25% of US large equities of S&P 500), the AU government bonds 7 YEAR has the largest proportion in the portfolio, at 36%, and the AU 13-week treasury notes at 24%. 1.3 The performance of the portfolios. By using historical data, the yearly average portfolio returns were shown in the below list. Table 1.6 The yearly average portfolio returns At the same time, Sharpe ratios over the sample period were: Table 1.7 Sharpe ratios over the sample period 5 Monash University BFF5935 Portfolio Management and Theory The average returns (yearly) of trailing 3 and 5 years at the end of every year is: Table 1.8 The average returns (yearly) of trailing 3 and 5 years at the end of every year The graph of average yearly return of portfolio: Graph 1.2 Average yearly return of portfolio Standard deviation (both monthly and yearly) of the portfolios over the sample period 6 Monash University BFF5935 Portfolio Management and Theory Table 1.9 Standard deviation (both monthly and yearly) of the portfolios over the sample period Probability of a negative return in any one year over the sample period is shown in the below list: Table 1.10 Probability of a negative return in any one year over the sample period 1.4 Detailed comments on the performance The client, Andrew Utley is 40 years old, he has a certain ability to take risks. At the same time, he needs a higher return to meet his required. Therefore, he would better to choose a higher risk portfolio to earn a higher return. Through the question 2, the client should choose Australian Equities of S&P/ASX MIDCAP 50, US large equities of S&P 500, AU government bonds 7 YEAR and AU 13week treasury notes. First, S&P/ASX MIDCAP 50, US large equities of S&P 500 has a high return, so it easy to make Utley get his investment objective. Second, during 1993 to 2016, the return of AU government bonds 7 YEAR and AU 13-week treasury notes have been steady growth. although the return of these two asset classes has lower return than Australian Equities of S&P/ASX MIDCAP 50 and US large equities of S&P 500, the risk of AU government bonds 7 YEAR and AU 13-week treasury notes have been steady growth are much lower than the two equities. They can ensure that customers can be profitable during the investment period. 7 Monash University BFF5935 Portfolio Management and Theory Through the SSA, there are three kinds of portfolios: growth, balanced and capital stable. The client had invested Australian Equities of S&P/ASX MIDCAP 50, US large equities of S&P 500, AU government bonds 7 YEAR and AU 13-week treasury notes, yet, the actual risk of these four asset classes are a little high. The risk of growth and balanced portfolios are too high. Therefore, it needs to a conservative portfolio to balance risk, the capital stable portfolio is the best choice. This portfolio will not only guarantee a relatively low investment risk, but also gets a reasonable return to ensure that customers can achieve investment objectives on time, or even return to exceed the target. 8 Monash University 2. BFF5935 Portfolio Management and Theory Individual Portfolio 2.1 Return Objective Table 2.1 The primary goal of Andrew (client) Primary Goal of Andrew Future value of fund $2,052.222 (Pretax Inflation Adjusted Return) Present Value of Fund $1,000,000 Annual Payment First year Second year Number of year Minimum Required of Return $12,500 $27,500 25 5.7% Andrew’s primary goal is to have $1 million dollar in today value by invest $350,000 after 25 years, taking inflation rate into concerned, the minimum required rate of return is 5.7%. 2.2 Risk Objectives Table 2.2 Andrew’s (client) financial and income statement Financial Statement Cash $20,000 Inherited Asset Other Asset Total Asset $350,000 Salary after tax Expensed Net Income $200,000 $570,000 Income Statement $97,500 $70,000 $27,500 Client indicates that he prefers long term investment to take advantage of of the higher return potential of growth assets and they want to avoid high transaction costs. Client has higher risk tolerance than moderate degree of risk since he has stable annual income of $150,000 and his living expense will be offset by annual salary increased. 9 Monash University BFF5935 Portfolio Management and Theory 2.3 Investment Constraints 2.3.1 Time Horizon The client is planning for their investment for 25 years. 2.3.2 Liquidity requirement The client wants to have an emergency fund to cover at least 3 to 6 months’ worth of living expenses. It is required between $17,500 and $35,000 for this fund. 2.3.3 Tax concerns Client’s salary and all capital gains and investment income are taxed at 35% and no taxsheltering strategies are available. 2.3.4 Legal and regulatory factors There are no legal and regulatory factors. 2.3.5 Unique needs and preferences There are no unique needs and preferences. 2.4 Asset Allocation Through the analysis of client’s financial and income states we found that client prefers a long term investment and has a willing of high return. Andrew has a certain ability to take some risks but the risk of growth and balanced portfolios are too high because the US large equities of S&P 500 in these two portfolios takes large proportion. Although the average return of the US large equities of S&P 500 is high in growth and balanced portfolios which are 14.05% and 12.78%, the probability of a negative return of the US large equities of S&P 10 Monash University BFF5935 Portfolio Management and Theory 500 is the highest between those four assets which is 39.13%. Hence, to balance the risk, he better choosing capital stable portfolio. Moreover, since the client requires a long term investment, this portfolio will provide a stable growth because the return of AU government bonds 7 YEAR and AU 13-week treasury notes have been steady growth during the sample period. This can ensure client to achieve his investment objective on time. Table 2.3 The decision of client’s portfolio Capital Stable Moderate Objective Allocation Allocation Australian Equities of S&P/ASX 15% MIDCAP 50 US large equities of S&P 500 25% AU government bonds 7 YEAR 36% AU 13-week treasury notes 24% Total 100% 11
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