1Q 2012 was a good quarter for most investors as most of the funds on Fundsupermart turned in positive returns, while the bottom performing funds would not have caused much damage to a well diversified portfolio (bid-to-bid, SGD terms). Of the 17 geographical regions and countries we track, all 17 of them ended 1Q 2012 higher in SGD terms, highlighting the broad based strength in equity markets thus far. For greater insights into the top and bottom performing markets of 1Q 2012, see Equity Market Review 1Q 12: A Positive Quarter For All Markets.

Top Equity Funds

Given the return of risk-taking amongst investors in 1Q 2012, it comes as no surprise to see many of the 'riskier' assets at the top of the best performing equity funds for the quarter. Amongst the top 10 funds, 5 of them actually appeared on our list of the Worst Performing Funds for 2011. Despite the rally by these 5 funds, none of them have yet to fully recover from their losses back in 2011.

With India and Russia amongst our top performing countries as examined in our article Equity Market Review 1Q 12: A Positive Quarter For All Markets, it comes as no surprise to see both the HGIF Indian Eq SGD AD and JPM Russia A (dist) USD appear on the list. JPM Russia A (dist) USD was undoubtedly helped by the rise in oil prices (Brent rose 15.6% for the quarter in USD terms) and the strength of the Russian consumer, as the fund held 32.3% and 17.7% of its portfolio in the two sectors respectively. As for HGIF Indian Eq SGD AD, we note that the fund's overweights in financials (25.7%), materials & industrials (19.4%) and consumer goods (18.3%) helped to propel the fund's performance over the past 3 months. Amundi India Infrastructure Fd SGD was likewise heavily invested in the financials sector (29.2%), which contributed to its 19.9% performance for the quarter.

Legg Mason CM Opps Fund A Acc USD has done extremely well for a US equity fund, beating the S&P 500's quarterly return of 8.6% by a mile. A quick glance at its end of February 2012 factsheet reveals heavyweights in the financials (31.0%), consumer discretionary (17.5%) and technology (17.3%) sectors, sectors which have done extremely well in the US. We also note that the many of the fund's top 10 holdings comprise of companies belonging to these 3 sectors.

Rounding up the top performing list are funds invested in thematics/sectors such as United Global IPO Fund, United Global Technology Fund, as well as those invested in the riskier and more volatile emerging and frontier markets such as LionGlobal Vietnam SGD and PineBridge EM Europe Eqty A USD.

Top Bond Funds

Fixed income funds generally underperformed equity funds in 1Q 2012 as a "risk-on" rally enticed investors to turn to equities. In general, the riskier segments of fixed income such as High-Yield and Emerging Market Debt outperformed the safer fixed income classes which had previously done better in 2011 as evidenced by Table 2 above. Rising yields in the safer segments of fixed income as investors' money flowed to riskier assets was the main reason why few global bond funds invested in safer government debt performed well during the quarter.

Leading the pack was United International Bond Fd, a fund which has an unconstrained mandate and is currently heavily invested in the High Yield space (over 67% of its portfolio as per annual report dated 31 December 2011), with high geographical concentration to China (31% as of February 2012's factsheet). Other notable performers include Fidelity Asian HY AMDIST SGD-Hged and FTIF-Templeton Glb Bond A(mdis) SGD-H1, two funds on our Recommended Funds 2011 List. The yield in the Asian High Yield space has been falling over the quarter from 10.9% to 8.7% as of 22 March 2012, returning 10.0% (in USD terms) and allowing the likes of Fidelity Asian HY AMDIST SGD-Hged which has over 80% of its portfolio in the non-investment grade space to gain 7.2% over the quarter. Our other recommended fund, FTIF-Templeton Glb Bond A(mdis) SGD-H1, has benefited from its currency positions and its credit exposure to sovereigns in the Asia ex Japan and Latin American region. The fund's active currency positioning has also seen it underweight the Japanese Yen, allowing the fund to deliver positive returns and outperform its benchmark.

the bottom performers

Amongst the bottom performing funds, 3 out of the 10 funds came from the commodity-related space. Commodities haven't done too well this year on a whole despite Brent oil rising by 15.6% on a year-to-date basis, as indicated by the Thomson Reuters/Jefferies CRB Commodity Index returning 1.04% for the quarter (in USD terms as of 30 March 2012). Gold related investments have underperformed relative to equities as well, with spot gold only returning 6.69% in 1Q 2012 (in USD terms) while Gold miners have come under pressure in recent months. Thus, it comes as no surprise to see funds such as DB Platinum Commodity RIC-C SGD Hedged, BNP Paribas Agriculture (SGD) Fund, DWS Noor Prec Metals CL J SGD and United Gold & General Fund amongst the bottom performing funds.

Other notable underperformers were funds invested in the safer segments of fixed income, such as the United Global Bond SGD, Fullerton Global Bond Fd Cl B SGD and Fidelity USD Bd USD. All 3 funds had significant exposure to safe assets such as US treasuries (as per their respective factsheets dated February 2012)

Other noticeable underperformers are BNPPL1 Eq World Utilities EUR and Man AHL Trend SGD. Utility companies world wide have been presumably under pressure from rising oil prices, which have dented their share prices and thus hampered the performance of an otherwise usually defensive sector and thus BNPPL1 Eq World Utilities EUR. As for Man AHL Trend SGD, its portfolio positioning in the metals sector is the likely cause for its poor performance in 1Q 2012.

Conclusion

Despite equity funds trouncing fixed income funds returns on the back of a rough 2011, there remains plenty of opportunity and potential upside within several equity markets under our watch. Contrasting global fixed income yields which hoover near historically low levels against the multi-year low valuations of equity markets, it is clear that equities present attractive long-term investment opportunities. Hence, we continue to favour equity markets and maintain our overweight recommendation on equities vis-à-vis bonds.

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