Diversity proves the byword for winners in golden year of 1998

DIVERSITY was the key to restful nights last year, as demonstrated by the latest winners of the South China Morning Post Fund Manager of the Year Awards.

For equity markets around the world, last year proved golden. Many funds produced returns way above historical norms, and investors did not have to venture into volatile emerging markets or exotic sectors to earn them. However, those who continued to focus on the problems in Asia would have missed the solid gains earned elsewhere.

United States and Europe-based funds posted one-year returns of 30, 40 or even 50 per cent. To put that in perspective, the Standard & Poor's 500-stock index, a broad measure of US equities, has returned an average of just 9.9 per cent over the past 70 years.

Fund managers are notorious for failing to keep pace with the markets they cover. But the S&P 500 gained 26.7 per cent in 1998, and a handful of fund managers - led by Allied Capital Management's ACMGI American Growth Portfolio, which returned slightly less than 50 per cent - left the benchmark in the dust. This fund is distributed in Hong Kong by New-Alliance Asset Management, an ACM joint venture with Sung Hung Kai Properties.

In buoyant Europe, the German market made the biggest score, with Baring Fund Management's German Growth fund living up to its name by returning 72 per cent. But spreading your risk across Europe, through Sun Life Global Management's European Growth Fund, would still have returned 52 per cent.

Even economically moribund Japan offered positive returns. Prudential Unit Trust Managers' Japanese Unit Trust squeezed a respectable 22 per cent out of that market last year.