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Investors urged to diversify

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14/02/2008

Commodities were the best performing asset class in 2007, according to Clerical Medical.

Research from the pensions and investment provider showed returns from commodities rose by 20.6% last year, boosted by a 77.5% increase in the price of soyabeans as well as a strong performance from precious metals (26.4%), such as platinum (37.2%).

However, Clerical Medical said portfolio diversification was key as the majority of asset classes saw returns of below the long-term average in 2007. Shares underperformed both domestically (5.3%) and internationally (5.2%), delivering their lowest returns in five years. Commercial property saw its weakest returns (-5.5%) in 15 years.

Looking back over the last decade, though, residential has provided the best returns out of all the asset classes, averaging 17.8% per year since 1997. Commercial property was the next best performer (11.4% per year), but international bonds provided investors with the worst returns over the long term, averaging 4.4% per year.

Martin Ellis, chief economist at HBOS, said: “Recent market performance highlights the benefits of portfolio diversification.

“Given the recent financial market turmoil, UK and international shares provided subdued returns in 2007, while UK residential property continued to be one of the best performers.”

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