Global Asset Management

Global equity markets rose by more than 5% in first quarter. The actively managed global equity composite underperformed its benchmark for the quarter, despite positive contributions across some sectors, such as software. The underperformance was largely a result of stock selection in diversified financials and the underweight position in the strongly performing materials sector. Our growth equity capabilities saw the US Mid Cap Growth composite outperforming its benchmark while US Large Cap and US Small Cap both underperformed. Longer-term returns of all capabilities against their benchmarks remain strong. 

Yields rose in nearly every developed bond market in first quarter 2006 as investors responded to a concerted tightening in monetary policy by central banks across major economies. Despite this, corporate bonds and mortgage-backed securities outperformed government bonds in first quarter 2006.

Global fixed income portfolios posted total returns well in excess of their performance benchmarks in first quarter 2006, sustaining their strong long-term track record.

Global balanced strategies lagged benchmarks somewhat during the quarter. Security selection in equities was mostly responsible, although this was partially offset by outperformance in fixed income. Currency selection made a positive contribution due to overweights to Asian currencies. Longer-term returns against benchmarks remain positive.

Real estate continued to see solid capital inflows in first quarter into institutional and wholesale real estate products. This was most noticeable in global real estate securities funds based in Switzerland, which grew by more than CHF 500 million to CHF 1.3 billion. Newly launched real estate products in the UK and Continental Europe continued to attract interest from both investors and consultants. The quarter saw solid absolute performance in both private real estate funds and global real estate securities funds.

Alternative and quantitative investment strategies posted strong gains in first quarter 2006, as hedge fund strategies were generally positive across the spectrum. Single manager hedge fund strategies started positively in January and added to their gains in February and March, with the multi-strategy hedge fund and each of its components producing strong risk adjusted returns. Multi-manager funds also earned attractive risk adjusted returns in first quarter.