Among the top 20 investment funds distributed in Singapore, 14 were invested in fixed income, while six were commodities and natural resources funds, according to Morningstar Research.

The top performer in the three months ended March 31 was ABN Amro Currency EUR, a short-term bond with returns of 16.7 per cent. The DB Platinum IV Metal Drive Guaranteed USD fund came in second with 12.5 per cent returns.

The average return for the top 20 funds was 7.8 per cent.

Said Mr Vasu Menon, OCBC Bank's vice-president of group wealth management: 'Commodity funds benefited from the surge in commodity prices, while bond funds benefited from rate-cut expectations and heightened risk aversion, which caused money to flow out of risky equity investments into lower-risk bond investments.'

In recent months, the prices of wheat, rice, corn, oil and metals, among other commodities, have spiked - resulting in good returns for commodities or resources equity funds.

With most global equity markets in the red during the first quarter, it is hardly surprising that most equity funds did poorly, too.

Apart from Taiwan's bourse, which gained 3.2 per cent, all other Asian markets delivered negative returns in excess of 10 per cent in the first three months of the year, said unit trust distributor Fundsupermart.

Dragged down by turbulence in global equity markets, Singapore's benchmark Straits Times Index (STI) fell 13.2 per cent, while Malaysia's stock market dipped 11.8 per cent.

Looking ahead, however, should investors hold on to bonds and commodities?

IPP Financial Advisers investment director Albert Lam believes investors can include bonds as part of a diversified asset allocation, as they help to mitigate volatility.

'We prefer Asian bonds with their higher yields and potentially stronger currencies. However, at some point in the future, when the sub-prime crisis tails off and the credit markets return to normal, we would favour US fixed income,' he said.

Mr Lam also advises investors to consider funds invested in commodities and emerging markets equities.

Despite the uncertainties facing financial markets, OCBC's Mr Menon said there were still pockets of medium-

term opportunities, especially for those with limited exposure to equity markets.

He believes Asia and the world's emerging markets 'remain attractive' from a medium-term perspective, as they are likely to outperform many other asset classes given the promising growth prospects in these markets.

For instance, the International Monetary Fund has projected that Asia, excluding Japan, will post robust economic growth of 7.5 per cent this year, almost twice the 3.7 per cent forecast for the world economy.

However, Mr Menon cautioned that in the short term, markets in Asia and other emerging regions were likely to stay volatile and might even correct further.

For those keeping score, of the 20 worst-performing funds, eight were China equity funds, while eight were Indian equity funds.

This is not surprising, considering that the Indian and Chinese markets were the worst-performing markets in the last quarter of 2007, posting a 27.3 per cent and 23.1 per cent drop, respectively, said Fundsupermart research manager Mah Ching Cheng.

With the selldown in the first quarter, she is finding many equities markets like Japan and India more attractive than at the same time a year before.

Looking ahead, both Mr Menon and Mr Lam advise investors not to 'over-invest' in any particular theme or sector but to instead spread out their investments over the next few months, in case markets weaken further.

lorna@sph.com.sg