The aftermath of the dotcom crash and the imminent US invasion of Iraq sent the index plummeting to 3,287 at the close of play on 12 March 2003 – its lowest level since the mid 1990s.
Since then there has been the small matter of the financial crisis, but in spite of high levels of volatility, the index is now 48 per cent higher than it was 10 years ago, at 6,402.
Tom Stevenson (pictured), investment director at Fidelity Worldwide Investment, says the strong performance of the stock market since then illustrates the merits of investing when sentiment is most depressed. "It is only three years ago that the investment industry was wringing its hands over a 'lost decade' for stock markets," he said.
"Ten years on from the bursting of the dotcom bubble in 2000, it was hard to make the case for investing in equities."
"Today it looks very different, with the FTSE All Share index having nearly doubled since the market low of 12 March 2003. For investors who sensibly reinvested the income from their shares, the returns over that period were even more spectacular."
"The total return of the All Share index has been 193 per cent since March 2003, nearly trebling the initial investment. The best-performing shares and funds have done considerably better even than this."
"The key lesson I have taken from the performance of stock markets over the past 10 years is that when sentiment is most depressed, the potential rewards are usually greatest."
"When the market bottomed in March 2003, the British invasion of Iraq was imminent, the TMT boom had ended badly and almost everyone was pessimistic about the outlook for investing."
"The reality was that this was a great time to invest."
"Timing market turns like this is impossible and requires a stronger contrarian streak than most of us possess."
"The answer is to invest regularly through the cycle and to maximise your total return by ensuring that you reinvest dividend income."
Here are some of the best-performing equity funds since 12 March 2003, on both an absolute and relative basis:
Emerging markets
The list of top-performing funds on an absolute basis is dominated by those with either an emerging markets or small cap focus.
Latin American funds have performed best overall, with four of the top-five on the list delivering the best returns over the decade-long period. Invesco Perpetual Latin America is number-one, with returns of 905.88 per cent.
Performance of funds vs index since 12 March 2003
Source: FE Analytics
However, while these funds have rewarded investors with stellar profits, their relative performance has not always been the best.
Two of the four funds have actually underperformed the MSCI Latin American index over the period, and JPM Latin America Equity has only outperformed by around 10 percentage points.
Arguably the best-performing fund on both an absolute and relative basis is the Aberdeen Emerging Markets fund, run by Devan Kaloo’s emerging markets team.
The £4bn, five crown-rated fund, which is currently in the process of being soft-closed, has returned 666.32 per cent since March 2003, making it the fifth best-performing fund in the IMA universe overall.
Its MSCI Emerging Markets benchmark has returned 423.9 per cent over this period.
Other notable performers with an emerging markets focus include First State Global Emerging Markets, JPM India and Lazard Emerging Markets, which have delivered at least 500 per cent.
Small caps
Small cap focused funds have been the other standout performers during the 10-year rebound – particularly those with a UK focus.
Number-one in the sector over this period – and sixth overall – is FE Alpha Manager Daniel Nickols’ Old Mutual Dublin UK Select Smaller Companies, which has returned 649.47 per cent.
Giles Hargreave’s Marlborough Special Sits portfolio is not far behind, with 613.54 per cent.
Both funds have significantly outperformed their respective benchmarks over this period, which is the sector for the Marlborough fund and the Numis Smaller Companies (ex IT) index for the Old Mutual fund.
Threadneedle European Smaller Companies, which recently lost star manager David Dudding, is the third-best performing small cap portfolio. It has returned 566.86 per cent over the last decade, beating its IMA European Smaller Companies sector average and HSBC European Smaller Companies ex UK benchmark by 196.44 and 319.92 percentage points respectively.
The best of the rest
While all of the funds towards the top of the list have been aided by the performance of the market they invest in, some have delivered significantly more value to their benchmark than others.
Among them is FE Alpha Manager Alister Hibbert’s BlackRock European Dynamic fund. It has returned 457.63 per cent over the near decade-long period, more than doubling the returns of both its sector and benchmark.
Performance of funds vs sector since 12 March 2003
Source: FE Analytics
Invesco Perpetual UK Aggressive is another good example; it has returned 354.83 per cent over the period, compared with 175.65 per cent from its IMA UK All Companies sector average and benchmark. The £136m portfolio is headed up by Martin Walker, who is also an FE Alpha Manager.
Far and away the best-performing multi-asset fund of the last decade is the CF Ruffer European fund, which invests in a mixture of equities and bonds. It is up 338.85 per cent over the period, beating its IMA Mixed Investment 20-60% Shares sector average by more than 200 percentage points.
Among the other top-performing funds that do not fall in the emerging markets or small cap category are JPM Natural Resources, which is up 410.15 per cent, and M&G Global basics, which is up 351.31 per cent.
In an article later on this week, FE Trustnet will highlight a selection of out-of-favour investment sectors, and ask industry professionals whether they are attractive on a long-term basis.