Fixed interest market returns were negative (Australia: -0.3%; International: -0.4%) as inflationary pressures mounted, albeit against the backdrop of moderating economic growth. The Australian bond market is expecting an additional rate rise in early 2007.

Equity markets rallied as M&A deals hit a record high in 2006. The International equity markets (hedged) returned 2.8%, while Australian equities rose 3.7%.

Australian Listed Property was once again the best performing asset class for the month (+7.2%) and year (+34.1%). The sector is trading at a substantial premium to historical valuations.

Emerging markets delivered another impressive year of performance (+23.0%). The sector continues to receive record inflows with $21 billion invested in 2006.