In second quarter, equity investors shifted away from cyclical, momentum-driven stocks such as semiconductors that had led the markets higher in previous months. Uncertainty over the impact of US interest rate rises, increased oil prices and the Iraqi conflict prompted investors to return to companies with solid fundamentals and earnings. The actively managed Global Equity composite outperformed the benchmark over the quarter, primarily due to good stock selection. Japan was a significant positive contributor, as the portfolio was overweight in exporters and underweight in underperforming domestic stocks and banks, adding strongly to returns. Despite the fact that market volatility remains near ten-year lows, we are finding valuation opportunities across many sectors. Our one-year performance is below benchmark but the long-term track record remains strong.
At the beginning of the second quarter, clear evidence of a strong rebound in the US labor market convinced investors that a rise in short-term interest rates was imminent. In anticipation of this move, bond prices fell, with the yield on the benchmark US Treasury rising by over 1%. Yield rises in European markets were more modest, despite concerns over rising inflation, and they outperformed comparable US bonds. Yields also rose in Japan as the pace of the recovery in economic activity continued to surprise investors.
Active market allocation and yield curve management both contributed evenly to the Global Bond composite, which comfortably exceeded the benchmark in second quarter, with relative returns continuing to be particularly strong in the longer-term track record.
Asset allocation portfolios finished ahead of their respective benchmark for the quarter as security selection, principally within equity strategies, added to performance. The asset allocation strategy detracted marginally from performance, attributable to the emerging markets equity overweight. The currency strategy had no material impact on performance. Longer-term relative returns continued to make positive contributions.
The second quarter saw generally difficult market conditions for hedge funds. With the exception of the fundamental market-neutral long / short equity strategy, most other strategies in the alternative and quantitative investments business reported negative performance during the quarter. They remain, however, generally positive for the year. The standout exception was the macro-trading strategy, which performed very strongly, as interest rates and currency positions that had been in place for some time performed well. The difficult trading conditions were reflected in weakness in our multi-manager strategies. The key multi-manager strategies recorded negative performance over the quarter, with the exception of those funds focused on market-neutral managers. In the twelve months to June, these strategies have generally been positive.
Our overall real estate investment performance in the year-to-date is very competitive with industry peers. The growth in our funds in the UK and Japan continues to be impressive. In particular, the UBS Triton Property Fund in the UK, now with a ten-year record, has grown assets by 45% in the past six months and 77% over the past year. The fund has achieved top quartile performance over three-, five- and ten-year periods.
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