Each year Mercer produces what we call a “Periodic Table” of New Zealand investment returns. The table colour-codes 15 asset classes and shows how each performed, on an annual basis, over the last 10 years.
While 2016 could not be described as a bumper year, it was notable in that all asset classes surveyed delivered a positive return. 2016 was only the second year in the last ten that this has occurred, and the first since 2010.
In keeping with the relatively modest returns, all the asset class returns fell within a relatively tight range of 11%. Commodities recorded the highest return of 2016 at 13.4% and Cash the lowest at 2.5%. The 11% spread of returns in 2016 was the lowest in the last ten years and well below the average spread over the previous nine years of 40% (and the highest range of 65% in 2008).
Commodities’ status as the best performing asset class in 2016 comes after it was the worst performing asset class in both 2014 and 2015, and in fact, generated negative returns in each of the last five years. The turnaround reflects the end of a long period of declining prices for commodities such as oil, natural gas, and food. After an era of abundant supply, an agreement by OPEC (the Organisation of Petroleum Exporting Countries) to limit oil production helped boost prices. Rising oil prices flowed through to higher prices for other energy-related commodities, with falling investment in coal also pushing prices up.
The table is yet another reminder that trying to pick the best asset class for the next year is an exercise in futility, even if it is a bit of fun. Last year’s bottom performer might just be next year’s top performer – or it could be bottom for another year. Which is why we diversify our portfolios and focus on the longer-term.
At this point, however, we believe the prospect of such seemingly “stable” outcomes across asset classes continuing is relatively low.
Click on the table below to access the results by market indices.
Click on an asset class at the right of the table to see how it has tracked over time.