Norwich Union Investment Watch

Article date: 31 March 2008

Senior economist Stewart Robertson examines the performance of asset classes over one, three, five, 10 and 15 years.

Summary

  • Gold, gilts and cash are best performers over one year
  • German Dax, FTSE 250 and gold best performers over three and five years
  • Gold, UK house prices, commercial property and FTSE 250 are best performers over ten years
  • Commercial property outperforms FTSE100 and FTSE 250 over 10 years
  • German Dax outperforms FTSE 100 over five and 10 years
  • FTSE 250 is top performer over 15 years

The past 12 months

Asset class

% Return over 12 months

Gold (US$)

38.9

Index-linked gilts

9.8

Gilts

5.8

Cash

3.1

UK house prices

2.5

Dax (Germany)

0.5

UK FTSE 100

-1.3

S&P (US)

-3.6

UK FTSE 250

-7.1

Euro Stoxx (Europe)

-8.1

UK commercial property

-9.2

Topix (Japan)

-22.9


The past three years

Asset class

Return over three years

Gold (US$)

29.7

Dax (Germany)

15.8

UK FTSE 250

14.3

Euro Stoxx (Europe)

10.9

FTSE 100

9.4

UK commercial property

8.2

Index-linked gilts

7.6

Topix (Japan)

6.6

UK house prices

6.0

S&P (US)

5.4

Gilts

5.0

Cash

2.8

  

The past five years

Asset class

Return over five years

FTSE 250

23.3

Dax (Germany)

21.5

Gold (US$)

21.0

Euro Stoxx (Europe)

16.4

FTSE 100

13.8

S&P (US)

11.6

UK commercial property

11.0

Topix (Japan)

10.5

UK house prices

9.0

Index-linked gilts

6.8

Gilts

4.2

Cash

2.5

  

The past 10 years

Asset class

Return over 10 years

Gold (US$)

12.0

UK house prices

10.9

UK commercial property

10.8

UK FTSE 250

9.8

Index-linked gilts

7.1

Gilts

5.9

Euro Stoxx (Europe)

5.1

S&P (US)

4.1

Dax (Germany)

3.7

UK FTSE 100

3.2

Cash

3.0

Topix Japan

0.3

  

The past 15 years

Asset class

Return over 15 years

FTSE 250

11.7

UK commercial property

11.3

Euro Stoxx (Europe)

10.6

S&P (US)

9.6

FTSE 100

8.5

Dax (Germany)

8.4

UK House prices

8.4

Index-linked gilts

7.3

Gilts

7.2

Gold (US$)

7.1

Topix (Japan)

-0.6

Cash

3.5

Stewart Robertson, Norwich Union senior economist, said: "Over the past 12 months the best performing asset class has been gold, the price of which has risen by nearly 40% from $670 to more than $900. Gold has not been the only commodity to have soared in price over the last year.

"Other metals and agricultural products have also seen rapid price rises. Part of the explanation could be speculation; part is higher demand from developing nations; but part is surely a reflection of worries over competing financial assets.

"Gold retains its position as the best performer over three years while German equities were the best developed stock market performer, generating an average annual return of 15.8%. Corporate Germany has successfully restructured within the Euro area. Germany has always made high-quality capital goods and over the last three years demand for these has risen strongly.

"The best performers over five years have generally been equities, reflecting the fact that February 2003 was close to the low point for stock market after the three-year bear market and build up to the Iraq war. All of the major markets provided double-digit average annual returns, with Germany and UK smaller caps standing out. Gold again performed well and UK property prices - residential and commercial - also provided average returns of about 10% a year.

"UK property (commercial and residential) have done exceptionally well over the last decade with an average annual return of about 11%. Gold comes out on top over this period, although the majority of the gain has been in recent years. Bond returns averaged around 6% to 7% a year, only just beating the 5.1% provided by UK cash."

James Dalby, fund development manager at Norwich Union, said: "Our analysis shows just how different the performance delivered by the various asset classes can be. We know that the market turmoil we have been witnessing in recent times has sensitised most investors to the risks associated with share-based investments. However, we also know that over the long-term such investments do have good potential for growth. The two golden rules for investors are to take a long-term view and to maintain a diversified portfolio at all times."

Note:

Sources: FactSet, Datastream. Figures to February 2008.
House prices are average of HBOS and Nationwide house prices indexes.
Returns for foreign (ie: non-sterling) assets take no account of currency movements.
Cash figures are average of UK savings accounts. Source Morningstar.

-ends-

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David Gwyer 07800 693187

About Norwich Union 

  • Norwich Union is the UK's largest insurer.  It is a leading provider of life, pensions and investment products and one of the largest Financial Adviser (FA) providers.  FAs provide over 70% of the company's long-term savings business in the UK.
  • Norwich Union is the UK's largest general insurer with a market share of around 14%, with a focus on insurance for individuals and small businesses.
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