A Guarded Return to Risk Taking: Searching for Alpha, April 2009

With current rates extremely low, the pain of holding cash at zero yield may be enough to convince investors to take a chance with some of the more battered asset classes. Indeed, most of the best performers in the first quarter fared the worst in 2008.

Take the credit markets, for example. Super-safe Treasury securities ended the first three months of the year down, while mortgage bonds and corporate debt managed gains. Municipal bonds and the high yield sector enjoyed larger positive returns.

Equity returns largely followed this same pattern. Large-cap tech stocks fared the best, managing a loss of only 3% during a tough period for the overall market. Growth stocks dramatically outperformed their value-oriented counterparts. Emerging market returns far outpaced those of developed markets, with the BRIC countries enjoying gains.