Shares are the top performers over the past year

Clerical Medical Assetwatch is a biannual study which tracks the value of five asset classes over a ten-year period (June 1997 to 2007). The asset classes are Shares (UK and International), Bonds (UK and International), Cash, Property (UK Commercial and Residential), Commodities (All Commodities and Precious Metals)

Clerical Medical calculates that international shares were the best performing asset class over the year to June 2007 with a 22.1% return. UK shares were the second best performer with an 18.4% total return.

This was only the second year in the past decade when UK and international shares have been the two top performing asset classes.

International shares also saw the highest returns (8.5%), followed by UK shares (7.6%) and residential property (6.1%) in the first six months of 2007.

THE PAST YEAR

Stockmarket outperforms housing market for the third successive year

The UK stock market's return of 18.4% (capital growth plus dividends) over the year to June 2007 outpaced the 11.5% rise in UK house prices, marking the third consecutive year that stocks have outperformed the housing market. This contrasts with the overall performance during the past ten years when UK house prices have risen by 189% (11.2% pa), comfortably surpassing the 108% (7.6% pa) return from UK shares.

Stocks outperform bonds for the fourth successive year

UK shares have outperformed UK bonds over the past year with a -0.3% return from UK bonds. Bond performance has suffered as rising interest rates have led to a fall in bond prices during the past 12 months. The last time UK bonds outperformed UK stocks was during the year to June 2003 when bonds returned 10% against a -10% return from UK shares.

Cash performs better than bonds over the past year

The return from holding cash was 5.2% over the year to June 2007. This was the second consecutive year that cash has outperformed bonds and is in contrast to the longer term trend (see below).

THE LAST FIVE YEARS

Precious metals best performing asset class over the past five years

Over the past five years, precious metals* have been the best performing of the asset classes tracked, returning 135% (18.6% pa). In the past year, precious metals returns have been more modest (7.6%) following a 45.5% return over the year to June 2006.

*gold, silver and platinum as measured by the Reuters CRB precious metals index

THE PAST TEN YEARS

Commercial property has been the top performer over the last ten years

Over the past ten years, commercial property has seen the strongest performing asset class, returning 251% (13.4% pa). UK stocks have returned 108% (7.6% pa), while UK bonds have returned 87% (6.5% pa) and there has been a return of 68% (5.3% pa) from holding cash in the short term money market over the decade.

Commercial property has outperformed residential property in each of the past three years. [Note commercial property includes capital growth plus income, while residential property only includes capital growth.]

Clerical Medical Group Economist, Tim Crawford, said:

"Shares have been the best performing asset class over the past year as strength in the local and global economies has boosted earnings. The UK stockmarket has outperformed the housing market for the third successive year. Stocks have also outperformed bonds for four successive years with bond performance suffering as rising interest rates have led to a fall in bond prices during the past 12 months."