Aussie shares drive double-digit returns

Despite the volatile conditions that dominated the close of 2007, the Australian share market posted its fifth double-digit calendar year return in succession of 16.2 per cent, according to the latest Mercer Sector Surveys released this week.

The latest data said that Australian shares managers had produced their best performance relative to the index since 2000, outperforming the S&P/ASX 300 index by 1.9 per cent.

And the data suggested that those commentators who urged investors to focus more heavily on international shares at the beginning of 2007 got it badly wrong and that for the eighth consecutive year, unhedged overseas shares could not match returns from the Australian market.

The Mercer data said that an investment of $10,000 in the Australian share market in January 2000 would have now risen to over $26,300 while a comparable investment in unhedged overseas shares would have dropped to $9,000.

The data analysis suggested that choice of manager had again been important in 2007, with an upper quartile manager producing a return of over 22.6 per cent, while a lower quartile manager would have returned worse than 15.2 per cent for the year.

The Mercer data also suggested that overweighting emerging markets at the expense of developed Asia would have proved beneficial in 2007.

It said emerging markets had another good year returning 25.1 per cent for Australian investors.