Despite political unrest, equity returns have reached new highs, and the best returns over the last five years have come from equities, according to AXA Framlington.
Mark Tinker, head of AXA Framlington Asia, said that equities’ recent performance belies the characterisation of equities as risk assets, compared to low risk bonds. “As we keep pointing out, the risks in investing are very different, volatility, benchmark risk, leverage and liquidity, correlation, company business risk, forecasting risk and so on,” Tinker said. Over five years, the S&P has returned 177%, compared to 210% for the Nasdaq and 154% for the FTSE. In the same period, emerging market bonds have returned over 80% and the UK long bond ETF has returned 30%. Tinker commented: “Doubtless some bond managers will point out that the return should be risk adjusted for volatility, but the point is, if as a long-term investor you can take volatility, then why accept the lower return?” Tinker added that an index of hedge funds returns has only returned around 21% in the last five years, due to lower levels of risk being taken after the crisis.