A significant proportion of the gains made by all three Adviser Fund Indices in 2006 were wiped out following last week’s correction in global equity markets.Over the week to May 17, the Aggressive AFI fell by 5.2 per cent, the Balanced AFI by 3.6 per cent and the Cautious AFI by 2.2 per cent. However, all three indices are still in positive territory this year despite the recent losses incurred. Most major global bourses recorded modest reductions in value, ranging from a 3.8 per cent drop in Japan’s Nikkei 225 index to a 7.6 per cent fall in the German Dax index in the week to May 17. The FTSE 100 (down by 6.7 per cent), S&P 500 (down by 4 per cent) and France’s CAC 40 index (down by 6.8 per cent) were also affected. Funds in the Aggressive AFI with exposure to commodities were among the worst performers over the period, including Merrill Lynch gold & general (down by 11.2 per cent), JP Morgan natural resources (down by 10.7 per cent) and First State global resources (down by 9 per cent). In addition, those constituents investing in emerging market equities, notably Threadneedle Latin America (down by 11.3 per cent) and Jupiter emerging European opportunities (down by 9.5 per cent), were also heavily affected by the retrenchment in global share prices. The relative performance of the AFIs during the equity market downturn was unsurprising, with the Cautious AFI proving most resilient. However, in the year to date, the Aggressive AFI is still the best performer, with the Cautious AFI having returned just 3 per cent. Compared with the returns achieved by the equivalent Apcims indices and Investment Management Association managed sector averages, the three AFIs have all outperformed their benchmarks since inception of the indices in November 2004. However, the levels of fluctuations exhibited by the AFIs are generally higher than those of their respective benchmarks. For example, the annualised volatility of the Aggressive AFI (9.6 per cent) was greater than that of the Apcims growth index (6.9 per cent) and the IMA active managed sector (9 per cent) from November 1, 2004 to May 16, 2006, according to Financial Express. Volatility rates were calculated using the FTSE All Share index as a benchmark. Towry Law investment services manager Jake Moeller says: “Market volatility should not be feared by investors. Valuation levels of global stockmarkets are reasonable, with markets underpinned by reasonable earnings growth and solid company balance sheets.” Moeller predicts that the FTSE 100 index will be around the 5,900 mark by the year end and says growth investors should respect the fact that volatility is fuelling their returns. The Adviser Fund Index series comprises an Aggressive, Balanced and Cautious index each tracking the performance of portfolio recommendations from a panel of 18 investment advisers. For each risk profile, all panellists specify a weighted portfolio of up to 10 funds from the authorised UK unit trust and Oeic universe that, when aggregated, define the constituents and weightings of the three AFIs.