Persistent volatility is a feature of UK equity performance in 2006, particularly since the mid-May share price correction. Investors in domestic equities have seen big share price fluctuations during a period of market uncertainty.The interest rate rise last week was yet another catalyst fuelling market instability. The FTSE 100 index dropped by 1.6 per cent during trading on August 3, the day of the rate rise announcement. The FTSE All-Share has seen significant price swings so far this year. On a total return basis, the index rose by 11 per cent from January 1-May 9. The All-Share then fell by 9.9 per cent to June 14 before bouncing back by 7.1 per cent to July 7. A further 3.7 per cent drop to July 18 was followed by an increase of 5 per cent to July 28. Overall, the index was up by 7.8 per cent from January 1-August 2. UK equity funds in the Aggressive Adviser Fund index have exhibited a wide spread of returns this year. Portfolios significantly outperforming the FTSE All-Share include Jupiter UK growth (up by 14.4 per cent from January 1-August 2) and Schroder UK alpha plus (up by 14 per cent). Conversely, some managers have had significant difficulties in keeping up with the market, including Neil Pegrum’s Cazenove UK dynamic (down by 2.7 per cent) and New Star UK special situations (up by 0.8 per cent) managed by James Ridgewell. Share prices of smaller companies have tended to fluctuate more heavily than large caps. Looking at the Investment Management Association UK equity sectors, the average fund in the UK smaller companies sector was more volatile than the equivalent UK all companies average, which in turn was more volatile than the UK equity income sector. Despite fairly flat performance, portfolios including exposure to bonds have been able to dampen volatility, given the more smooth performance of the fixed-interest markets. But despite higher share price fluctuations, domestic equities have generally outperformed fixed-interest assets.