Banking for 7 billion and 7 million

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GLOBAL INVESTOR 3.06 Switching — 60 Figure 3 Source: Datastream, Cambridge Associates US GDP growth and private equity returns US GDP growth and private equity returns tend to be correlated over the medium-term time horizon. Figure 5 Source: Credit Suisse, CS Tremont Index Hedge funds In a market marked by rising volatility, hedge funds can offer capital preservation and steady returns. However, the selection of appropriate hedge fund styles and managers remains a key success factor. Annual growth rate in % Quarterly returns in % 8 20 6 4 2 0 –2 –4 1986 1989 1992 1995 1998 2001 2004 15 10 5 0 –5 –10 Index Monthly returns in % 450 10 400 8 350 6 300 4 250 2 200 0 150 –2 100 –4 50 –6 0 –8 1993 1995 1997 1999 2001 2003 2005 Private Equity performance (rhs) US GDP CS Tremont index performance (rhs) CS Tremont Total Return Index Figure 4 Source: Credit Suisse Correlation patterns The power of diversification is made visible by illustrating various correlation patterns of selected asset class returns (1994–2005). Figure 6 Source: Cambridge Associates US Private Equity Index Investments in unlisted companies are illiquid but tend to deliver returns superior to those of listed equities. The correlation to equities of well below 1 helps to improve the risk-return profile of a portfolio. Index Quarterly returns in % Equities Bonds Real estate Hedge funds Private equity Commodities FX overlays Art Equities 1.00 0.08 0.36 0.48 0.40 0.05 0.06 –0.02 Bonds 0.08 1.00 0.22 –0.08 –0.12 0.11 0.16 –0.02 Real estate 0.36 0.22 1.00 0.23 0.19 0.02 0.15 –0.02 Hedge funds 0.48 –0.08 0.23 1.00 0.36 0.15 0.26 –0.12 Private equity 0.40 –0.12 0.19 0.36 1.00 –0.10 0.13 –0.06 Commodities 0.05 –0.11 0.02 0.15 –0.10 1.00 –0.04 0.00 Foreign exchange 0.06 0.16 0.15 0.26 0.13 –0.04 1.00 –0.15 Art –0.02 –0.02 0.02 -0.12 –0.06 0.00 –0.15 1.00 1500 1250 1000 750 500 250 0 1986 1989 1992 1995 1998 2001 2004 20 15 10 5 0 –5 –10 < 0 0–0.2 0.21–0.4 0.41–0.99 Private Equity performance (rhs) Private Equity Total Return Index
GLOBAL INVESTOR 3.06 Switching — 61 Figure 7 Source: Bloomberg, DJ AIG Total Return Index Commodities Commodity futures have generated equity-like returns over the long term and have a relatively high volatility and low correlation with equities. This trend in commodity prices is expected to continue. Figure 9 Source: Bloomberg, Barclays Currency Trader Index FX overlays Diversification benefits of FX overlays stem from the large spectrum of strategies. Since 2004, the returns of FX overlays suffered from adverse market conditions, emphasizing the need for good manager selection. Index Monthly returns in % 350 16 Index Monthly returns in % 5500 8 300 12 5000 250 8 4500 200 4 4000 2 150 0 3500 100 –4 3000 50 –8 2500 – 4 1991 1995 1999 2003 1993 1995 1997 1999 2001 2003 2005 DJ AIG index performance (rhs) DJ AIG Total Return Index BCT index performance (rhs) Barclays Currency Traders Total Return Index Figure 8 Source: Bloomberg, GPR REIT World index Listed real estate Historically, real estate assets revealed an equity-like risk-return profile, but with useful diversification potential. Presently, we prefer investments in Asia (excluding Hong Kong) and Europe. Figure 10 Source: Art Market Research, Art 100 Top 25% Art market The art market remains buoyed by a strong economy and the windfall profits generated by commodity prices in major emerging regions. Index Monthly returns in % 800 12 Index Monthly returns in % 7500 12 7000 10 600 6 6500 6000 8 6 400 0 5500 5000 4 2 200 – 6 4500 4000 0 –2 3500 –4 0 –12 3000 –6 1990 1994 1998 2002 2006 1993 1995 1997 1999 2001 2003 2005 GPR 250 REIT World performance (rhs) GPR 250 REIT World Total Return Index AMR Art 100 Top 25% performance (rhs) AMR Art 100 Top 25% Total Return Index
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Issue 03 September 2006 Expert know
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Hangzhou, China
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What moves the world 2 World income
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