Periodic Table of Investment Returns

WHAT WERE THE TOP PERFORMING ASSET CLASSES OF 2021?

Mercer's annual periodic table of investment returns is out now >

Looking across 2021 and the decade ended 31 December 2021, a number of observations can be made from the Periodic Table:

• 14 of the 16 asset classes generated a positive return last year – bettering 2020 (12 positive returns) but not as remarkable as the 100% outcome achieved in 2019. 
• Leading the way in 2021, for the third time in the last four years, was Global Private Equity with a stellar return of 48.4%.  Amid a busy year for merger and acquisition activity, and investors seeking out alternative sources of return, this asset class delivered handsomely for those with a means to access it and the ability to tolerate its higher risk and lower liquidity characteristics. 
• Global Listed Property featured in a creditable, but distant, second place in 2021 at 29.0%.  The rebound for this asset class was welcome, after it had placed last in the table in the previous year as COVID-19 concerns weighed on investor sentiment in the retail and hotel sectors.  Meanwhile its counterpart, Global Listed Infrastructure, finished closer to mid-table at 17.0%. 
• Developed Market Global Equities was another asset class that produced impressive returns in 2021, up between 24% and 28% depending on whether foreign currency was hedged or unhedged.  The US market was a particular area of strength, supported by Europe.  Meanwhile, in a notable divergence, Emerging Market Equities were far softer at 2.5%, with Turkey and China amongst the main culprits. 
• Countering a recent trend, New Zealand Equities fell well down the leader board last year.  The sector sneaked into positive territory with a 0.2% return.  Despite a resurgence from Sky TV and big gains from Skellerup, tumbles from the likes of A2 Milk and Meridian Energy ensured a sluggish year for our local market. More widely, the relatively defensive characteristics of NZX companies served as a partial handbrake. 
• Bringing an end to a 10-year run, Australian Equities at 16.2% outperformed New Zealand Equities in 2021, and by a considerable margin. “Value” type stocks came back into favour across the Tasman, particularly benefiting companies in the Communications and Financial Services sectors. 
• After a fraught decade, Commodities roared back to life in 2021 with a healthy 26.3% gain. Rising inflation provided a helpful backdrop for this asset class, as did supply chain disruptions.  Energy was the strongest sub-sector, while precious metals were more muted.
• Other positive contributions last year came from the relatively steady performers NZ Direct Property (a healthy 19.0%) and Defensive Hedge Funds (a more subdued 4.3%). 
• New Zealand Fixed Interest (-6.2%) and Global Fixed Interest (-1.2%) took out the booby prizes in 2021.  Meagre yields on bonds were offset by capital losses.  Interest rates lifted as central banks around the world signalled that tighter monetary policy should be expected going forward.  Such a return outcome for fixed interest would have come as a surprise to some investors - neither sector had previously finished in the bottom two spots over the past decade. 
• As so often proves to be the case, Cash was a relatively unattractive place to be in 2021, albeit superior to fixed interest. Safety-conscious investors with a bias towards bank bills and term deposits would have seen their capital erode on a real (after inflation) basis. 
• Across the decade, the award for single highest annual return found a new recipient, being Global Private Equity thanks to its 2021 result. Meanwhile, the -22.8% return of Commodities in 2015 remained the lowest.
• As a group, last year’s asset class returns comprised a top-to-bottom range of 55%. This was the widest of any year in the last decade, and compares to the period average of 33%.    

Source: Mercer (N.Z.) Limited