The portfolio’s objective is to deliver a return of 3.5% pa above inflation (before fees and tax) over 3 year periods by limiting the risk of negative returns over this time frame.
Over the 3 years to 30 June 2017 the portfolio has outperformed its objective, producing a return of 5.2% pa (before fees) which was 3.6% above inflation. We have controlled risk in the portfolio over the period as outlined in the section below.
Global economic growth over the past year has been close to long-term averages, with almost all major economies having expanded by early 2017. This is being supported by a growth in consumer spending (business investment is also showing signs of picking up) with unemployment continuing to decline across major economies, notably the US, Japan and Europe. However, we still face a far from normal investment environment. There is an unusual level of uncertainty that emanates from the unresolved levels of high government debt and continuing budget deficits. Countries that were not at the epicentre of the GFC, including Australia and some emerging markets, were not burdened by high government debt and instead tend to have high household debt and a reliance on inflows of foreign investment. This debt also becomes an important drag on economic growth because consumers have less to spend when interest rates rise.
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