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In asset-class performance, equities took a drastic turn for the worse, detracting from performance in diversified strategies such as target maturity funds. After improved performance during the first quarter, non-U.S. equity markets led the decline during the second quarter as the worst-performing equity asset class. Emerging markets equity, which has historically been a highly volatile asset class, was the biggest loser with an 8.8% decline followed by developed non-U.S. equity with a 6.9% drop. In the U.S., the recent trend of growth outperforming value continued as did large-cap equity outperforming small-cap equity. Alternatives such as commodities also struggled during the quarter declining 4.6%. The bright spot was U.S. real estate investment trusts (REITs), the only equity asset class to turn in not only positive results but an actually strong 4.0% return, rewarding those target maturity funds that allocated significant assets relative to peers. Fixed income provided much more safety, with fixed-income asset classes ending the quarter with a positive return. Those asset classes with longer duration had the best performance as can be seen with TIPS and U.S. aggregate bonds relative to U.S. short-term bonds and cash. High-yield bonds, which exhibit a much higher correlation with equities than other fixed-income asset classes, did provide a respectable 1.8% increase.
In asset-class performance, equities took a drastic turn for the worse, detracting from performance in diversified strategies such as target maturity funds. After improved performance during the first quarter, non-U.S. equity markets led the decline during the second quarter as the worst-performing equity asset class. Emerging markets equity, which has historically been a highly volatile asset class, was the biggest loser with an 8.8% decline followed by developed non-U.S. equity with a 6.9% drop. In the U.S., the recent trend of growth outperforming value continued as did large-cap equity outperforming small-cap equity. Alternatives such as commodities also struggled during the quarter declining 4.6%.
The bright spot was U.S. real estate investment trusts (REITs), the only equity asset class to turn in not only positive results but an actually strong 4.0% return, rewarding those target maturity funds that allocated significant assets relative to peers.
Fixed income provided much more safety, with fixed-income asset classes ending the quarter with a positive return. Those asset classes with longer duration had the best performance as can be seen with TIPS and U.S. aggregate bonds relative to U.S. short-term bonds and cash. High-yield bonds, which exhibit a much higher correlation with equities than other fixed-income asset classes, did provide a respectable 1.8% increase.