The Adviser Fund Indices performed well in 2006, with all three AFIs outperforming their Investment Management Association managed sector and Apcims index benchmarks.
With a total return of 11.8 per cent, the Aggressive index beat both the average IMA active managed fund (10.2 per cent) and the Apcims growth index (11.4 per cent) last year.
The Balanced AFI (12.2 per cent) comfortably outperformed the IMA balanced managed index (9.9 per cent) and Apcims balanced index (10 per cent). Rhe Cautious AFI (9.9 per cent) finished the year ahead of the IMA cautious managed index (7 per cent) and Apcims income index (8.2 per cent).
Exposure to equities in the UK, Europe, global emerging markets and the Asia Pacific ex-Japan region, as well as commercial property fund holdings, boosted the performance of the three AFIs. However, allocations to bonds and North American and Japanese equities brought the overall performance figures down, with these asset classes all performing relatively poorly for sterling-based investors.
Had the 18 panellists chosen to invest a greater proportion of their portfolios in UK equities, performance would have been boosted further, given the 16.8 per cent total return of the FTSE All Share index. In comparison, the Investment Property Databank UK index rose by 18.1 per cent while the FTSE five to 15-year gilts index dropped by 0.1 per cent over the year.
As for the best performers across the AFI series, three funds appear in the top 10 performing retail funds in 2006, according to Financial Express. Neptune Russia & Greater Russia (56.74 per cent), Gartmore China opportunities (47.81 per cent) and Old Mutual UK select smaller companies (38.14 per cent) all posted impressive figures. These funds are represented in the Aggressive index only.
Volatility was a feature of global equity markets in 2006, including the market correction that started in mid-May. Most markets recovered strongly by the end of the year but investors were reminded of just how quickly share prices can fall. The Aggressive AFI exhibited the greatest fluctuations among the three indices, with a 9.9 per cent volatility figure over the year compared with 7.8 per cent for the FTSE All Share index and 17.9 per cent for the average fund in the IMA’s global emerging markets sector, according to Financial Express.
Since inception of the AFI series on November 1, 2004, the indices have posted strong returns. The Aggressive, Balanced and Cautious AFIs were up by 53.1, 45.1 and 33.4 per cent respectively to February 1, 2007. This compares with a return of 51.6 per cent from the FTSE All Share index. Performance of all three AFIs over January was positive although markets have been relatively flat this year.