Equities Summary

In many ways, the 2006-07 fiscal year closely resembled the previous year in that solid GDP and corporate profit growth combined with a relatively benign interest rate environment to deliver another year of very strong returns for equity investors. The current bull market in global equities began in 2002 and is now one of the longest in the past century, despite concerns related to the U.S. housing market, growing geopolitical risk and a liquidity crisis in the commercial paper market. Rising commodity prices, a falling U.S. dollar and the growing influence of China on world markets were major themes in the market that represented the continuation of trends from prior years.

Global equity markets peaked in July, then corrected significantly through mid-August, as liquidity in the credit markets dried up, causing many investors to reduce risk by selling equities. While a rebound in late August did not return equity markets to the July highs, it did allow most markets to recover enough to show solid gains for the fiscal year. ATRF’s total equity benchmark recorded a gain of 12.9% in 2006-07. For Canadian investors, returns from European and Australian markets were enhanced slightly by the strength of their respective currencies, while returns from the U.S. and Japan were reduced by the impact of weaker currencies. 

In order to ensure adequate diversification by geography, sector, investment style and market capitalization, ATRF holds its public equity assets in 10 different portfolios. On a combined basis, these portfolios generated a rate of return of 13.4%, which was slightly higher than the 12.9% return of the fund’s equity benchmark.