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Our aim is to achieve a superior return on the Club’s assets whilst protecting the Club’s capital from excessive market risk.
Economic background and investment returns
The financial year was dominated by major economies being at very different points in the economic cycle. The US economy continued to grow at a healthy pace stimulated by low interest rates, low energy prices, reasonable credit growth, business investment and consumer spending. To date this growth has not turned into wage growth or any concerns about inflation. Markets, however, continued to predict higher interest rates in the US, which lead to a consistently strong US dollar. Europe and Japan on the other hand have shown few signs of economic health. The lack of consumer and business demand or credit growth means policy makers have been more concerned about deflation than inflation. Interest rates have continued to decline and in some cases are now negative. Because of this economic backdrop the Euro and the Yen weakened substantially.
Most asset classes, with the exception of commodities, performed well during the year when viewed in local currency terms. When translated into dollars, however, returns from non-dollar assets were poor. The notable performers during the year were the S&P500index, which rose by 17%, and longer dated government bonds.
The investment portfolio benefited from an overweight positions in equities and US dollar assets, and from good equity stock selection. The fixed interest portfolio suffered in the early part of the year from holding a low duration position but was helped by relatively high corporate bond exposure.