WESTSCHEME'S "CASH" INVESTMENT OPTION

The funds invested in the Westscheme "Cash" Option are managed by ING Investment Management (INGIM) in a portfolio of high quality investment grade securities.  Westscheme decided to invest with INGIM with the aim of generating moderately better performance than that of the cash benchmark. 

Since mid 2007, there has been a dramatic change in global credit conditions resulting in sharp falls in the price of credit securities, including those in the Westscheme Cash Option.  This has adversely affected the performance of the Cash Option, which has significantly underperformed its benchmark over the course of the 2007-08 financial year.  Although credit markets stabilised somewhat over the course of April and May in 2008, in June there was further deterioration in credit markets led by renewed concerns in the strength of the global banking system. 

Even though forward looking returns for this product look attractive, its volatility is likely to remain high over the near term and possibly longer.  Given this, Westscheme has decided that the MIC Cash Option should be invested in a cash product that seeks to produce returns in line with the benchmark with confidence and low levels of volatility.  Consistent with this, Westscheme is finalising a transition plan for moving to a lower risk investment approach for the MIC Cash Option and this will be implemented by the end of 2008.  Following this transition, MIC Cash members can expect a gross return (that is, before fees and taxes) in line with the cash benchmark (that is, the UBS Bank Bills Index).

Howard Rosario
Chief Executive

8 August 2008

Previous articles from the Chief Executive are available via the links below:

Westscheme's Investment Strategy July 2008

Westscheme's approach to valuing its investments

Risks in current investment markets »

How has super performed over the long term? »

Positioning of Westscheme in meeting the Challenges of Market Turmoil »

Investment Volatility »