Investors turn to utilities, gold and dividends for stable returns as equities sink

Poor equity market performance is driving investors into alternative asset classes such as utilities, gold and dividends in the search for stable returns

Surging interest in utilities

Market jitters pushed the Dow Jones Emerging Markets Total Stock Market Index, the newly launched Asia Dow Index and the Europe Dow Index down by 20%, 16.7% and 11.8%, respectively, in 2011.

The Dow Jones Industrial Average fared better and was up 5.5% over the year, while the S&P 500 rose by 1%. Dow Jones Indexes (DJI) saw a surge in interest for its utilities index, which was up by 19.7%. Gold was up by roughly 9.6% over the year.

Over the same period, DJI's benchmark commodities index was down 13.3%, while the MSCI all country world indexes lost about 10% and the Euro Stoxx 50 lost just over 17%.

Developed markets were less volatile than emerging markets, according to Dimitris Melas, executive director at MSCI in London. "The gap has remained constant: developed markets fell by 8%, whereas emerging markets were down by 20%,” says Melas. “This is not unusual in a period of increased volatility and risk aversion, and if we think about what is driving this performance, one of the main causes has been the unfolding eurozone debt crisis, with its implications for the global economy.”

While increasing anxiety and a consequent flight to safety has been the main theme, investors are still attracted to the dividends theme, says Jamie Farmer, director at Dow Jones Indexes in New York. “We launched a number of dividend indexes covering different regions last year to satisfy investor demand for yield,” he says.

One of the main causes has been the unfolding eurozone debt crisis, with its implications for the global economy

Famer also notes increased interest in strategic allocation investment themes. “We are bringing out new strategic indexes that cover dividends, as we see demand rising in both Europe and Asia.”

Dow Jones Index returns, 2011