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(February-2002) Market hibernated as bears came out
Most investors would have been better off if they had just kept their savings in the bank last year. Cash would have at least given them a gain of 5.2 per cent, compared to the 3.8 per cent delivered by the median pooled fund and the 4.1 per cent from capital stable funds, according to a recent Mercer survey.
The bear market in the US, the September 11 attacks, volatile share markets, war and general economic malaise helped growth fund managers produce their lowest median return since 1994.
According to InTech Financial Services, those with heavy exposures to international shares were stung the most after the MSCI World ex-Australia Index lost 14.5 per cent over the year. The depreciation of the Aussie dollar against all major currencies, however, helped ease the pain, with unhedged international equities falling by a softer 10 per cent.
The best place to have been in 2001 was in property securities, which benefited from a downward trend in interest rates. The S&P/ASX 200 Property Accumulation Index rose by 14.6 per cent.
The Australian share market would also have been a reasonable bet. Despite the huge losses that followed the September 11 attacks, the S&P/ASX 200 gained 10.4 per cent over the year, outperforming the global index (in local currency terms) by 24.9 per cent.
Australian bonds also produced solid full year returns for investors (5.4 per cent), as did hedged international bonds (7.1 per cent).
Investors, however, would be ill advised to base their asset allocation on developments in 2001. Over a 10-year period, the picture is entirely different, with unhedged international shares the best performer showing an average annual return of 12.4 per cent and hedged international shares delivering 9.2 per cent. The worst returns — both of 6.1 per cent — stemmed from listed property and cash.
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