2009 reviewed

After a poor start to the year, equities provided very good returns from their trough in early March. Dull utilities rose the least, while more economically sensitive sectors such as basic materials and technology gave the best returns. Lower dividend and smaller company shares performed better than higher yielding and larger company shares respectively. Japan was the worst performing area, while stellar performance was seen by Asian and emerging markets. The chart below shows returns from UK equities (blue line) and world equities in sterling terms (brown line).

After being one of the few assets that rose in 2008, gilts were one of the few assets to fall in 2009. In contrast, corporate bonds rose - the lower the quality, the greater the rise. The chart below shows returns from gilts (blue line), higher quality corporate bonds (brown line) and lower quality bonds (purple line).

Interest rates have been cut close to zero in many countries in response to the credit crisis. While some emerging markets have begun to increase interest rates, those of most developed countries remain at very low levels. The chart below shows the UK base rate (blue line) and the interest rate charged by banks to lend to each other for three months (brown line).

Commercial property had two distinct periods - falling in the first half, rallying in the second. Retail properties were the most volatile while industrial properties were the least. Property shares rose earlier in the year as equities rallied. The chart below shows returns from the IPD index of physical property in the UK (brown line to November) and property investment trusts (blue line).

Hedge funds gave solid returns in 2009, if unspectacular by the standards of other risk assets. The chart below shows the returns from open ended funds of hedge funds (brown line) and hedge fund investment trusts (blue line). The investment trusts' share prices have reverted towards the value of the underlying holdings.

Structured products cover too wide a variety of instruments to be able to provide an all encompassing analysis. Broadly, investment terms were less attractive than previously due to lower interest rates and falling volatility.

Private equity returns were linked strongly to quoted equity returns as investor interest returned to this area. The chart below shows returns from private equity investment trusts (blue line) and the UK quoted equity index (brown line) for reference.

Commodity prices were strong, with industrial metals leading the way. Precious metals and energy were also strong while agricultural commodities were little changed. The chart below shows the price of gold (blue line, left hand axis) and oil (brown line, right hand axis), both in US dollars.

Sterling strengthened against most major currencies. The chart below shows sterling against the US dollar (blue line), the Euro (brown line) and the Yen (purple line, right hand axis).