Equity markets improved, led by the US and Japan, as they benefited from increasing optimism for global economic growth and rising corporate earnings expectations, with technology stocks performing particularly well.
Our actively managed Global Equity composite underperformed its benchmark during the quarter, reflecting our lack of exposure to strongly performing and highly leveraged, low-margin companies, as well as technology stocks. The composite did, however, maintain its significant outperformance over the longer term.
Global bond market returns weakened as bond yields rose on the improved world economic outlook. Our Global Bond composite benefited from its reduced exposure to the bond market in third quarter. For the year to date, the portfolio has also benefited from its currency strategy. Relative returns for the Global Bond composite have been particularly strong in periods of up to three years.
Asset allocation made another positive contribution in the quarter. Our overweight stance towards equities, over a period when markets have recovered significantly, has helped our global multi-asset mandates to outperform their benchmarks. Currency positioning also contributed positively.
In the alternative and quantitative business, despite the difficult trading environment for a number of strategies, the O’Connor multistrategy Global Equity Arbitrage fund posted positive returns in third quarter. The O’Connor currency and rates portfolio performed very strongly, as did our DSI quantitative long / short products.
The multi-manager programs registered strong performance in the quarter despite a difficult July with the rapid reversal in bond yields. Real estate continued to perform strongly on both a relative and absolute basis, with client demand remaining at a high level.
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