One of the best performing asset classes has been Emerging Market Equities which has benefited from continued reform and liberalisation. The MSCI Emerging Markets index has gained 56.35 per cent and the IMA Global Emerging Markets sector made 59.58 per cent.
Bryan Collings, managing partner of HEXAM Capital, expects next year to be more difficult, but as he explains, still profitable: "Caution and swiftness will be the watchwords in 2010, not courage. The easy gains in the wider equity markets have been made in 2009 after the volatility of late 2008. Looking ahead, stock selection will be vital as the rally broadens and the correlation between stocks becomes much lower."
"While equity markets are forward-looking and typically peak ahead of earnings, extreme liquidity swings can result in a significant lag between the market rally and the earnings 'catch up'. A pullback in the wider markets is warranted and probable in 2010 with a re-rating of debt and equity instruments across all asset classes as investors focus on the state of the real economy. This is likely to be temporary and, based on earnings growth and a re-rating of valuations; HEXAM expects emerging markets to end 2010 higher than current levels."
One of the more surprising performers has been corporate bonds; the IBOXX Sterling Corporate Bond All Maturities index returned 15.09 per cent for the year to 15 December, a significant increase from the average annual return of 4.78 per cent experienced for the five year prior to 2008.
This year also witnessed a rally in corporate bonds of 28.13 per cent between March and December. This has led to a bumper year for many funds within the IMA Sterling Corporate Bond sector returning 14.4 per cent and the best performing fund over this period, the Old Mutual Corporate Bond fund, made a staggering 33.46 per cent.
Source: Financial Express Analytics
This year has been less of a success for property, which is one of the few asset classes not to bounce back. The IPD UK All Property index has lost 1.41 per cent, despite beginning to recover in the second half of the year.
Worst performing property funds over 1-yr
| Rank | Fund | 1-yr (%) |
|---|---|---|
| 1 | Tri European Residential Property Standard | -47.3 |
| 2 | New Star International Property | -32.1 |
| 3 | Aviva Inv Asia Pacific Property | -26.9 |
| 4 | MFM Tait Walker Cautious | -23.3 |
| 5 | UBS Triton Property | -16.3 |
Source: Trustnet.com
While the market may be down, there have still been plenty of opportunities for investors; the IMA Property sector made gains of 11.9 per cent. Gary Hutcheson, head of property at Ignis Asset Management, thinks next year looks more promising as the market continues its belated recovery:
Hutcheson said: "The Ignis property team is cautiously optimistic about the next 12 months. While the UK is moving out of recession, the next few years are likely to be characterised by below-trend gross domestic product (GDP) growth. With a strong correlation between GDP growth and rental growth in the property market, we can expect more of the same for the next two or three years. Property is now being recognised for what it should be doing: offering an attractive income yield and some prospect of capital appreciation in the medium-term."
"Unpredictability" has very much been the stand out feature of 2009; with monetary and fiscal policy still in very much sailing in uncharted territory, expect more of the same in 2010.