ItÆs been a terrible quarter for real-estate investors. A compilation of leading benchmarks show that, amid generally lacklustre performance across many alternative asset classes, real estate investment trusts û as represented by the Dow Jones Wilshire Reit Index in the US û have lost -6.3% year to date, with a -9.6% drop in the second quarter.

Considering that in 2006, this index was the best performing alternative-investment benchmark, returning 36.1%, itÆs nothing short of a collapse in the sector. It has been incredibly rocky, as well, with year-to-date volatility measured at 16.2%, far higher than hedge funds, private equity, venture capital or commodities.

Thanks to last yearÆs strong performance, however, Reits are still up by 11.5% on a 12-month rolling basis.

Pimco releases a quarterly compilation of leading benchmark performance. Its data shows that Germany was the place to put your money during the second quarter, with the DAX up 21.4% year to date and up 40.9% on a 12-month basis.

Only emerging market equities compare to this performance. The MSCI Emerging Markets Index is up even higher on a 12-year basis, 43%, but only 16.1% year to date. This still represents strong performance, if not quite as powerful as Germany.

Developed country stock indices have generally fared well but with a notable tilt toward growth. The US Russell Mid-cap Growth Index has gained 11% year to date, while value indices have posted mediocre returns (8.7% for mid cap value; and 6.2% for large-cap value, versus 8.1% for large-cap growth). This is a big change: in 2006, it was the value indices that posted 20-22% gains, double the returns from growth. The eight-year value stock rally seems to have finally disappeared.

On average, however, Europe and emerging markets outperformed AmericaÆs S&P500 and JapanÆs Nikkei 225.

Fixed income continues to underwhelm. The US Lehman Aggregate has posted a mere 1% year to date, and 6.1% on a 12-month basis. You know itÆs bad when inflation-protected bonds outperform, with the Lehman US TIPS Index posting 1.7% YTD. On a US dollar hedged or unhedged basis, the JPMorgan non-US bond indices have basically returned zero so far this year.

The sole bright spot in bonds is high yield, which has returned 3% YTD and 11.6% on a 12-month basis. But even here the momentum is clearly losing steam: the Merrill Lynch High Yield Index returned a mere 0.3% in the second quarter of 2007. Clearly the damage from the fallout of AmericaÆs sub-prime mortgage sector is taking its toll.

Among alternative asset classes, hedge funds are performing the best. The CSFB/Tremont Hedge Fund Index has achieved 8.7% YTD, and 16.4% on a 12-month basis. This compares modestly better than the S&P500, which is up 7% YTD, but the MSCI Europe/Africa/Far East, the UKÆs FTSE100 and the MSCI Emerging Markets Index all did better û to say nothing of the DAX.

Investors who remembered to polish their crystal balls over Christmas and Chinese New Year would have dumped high-fee hedge funds in favour of straightforward European or emerging-market equities.

Within the sub-sectors tracked by CSFB/Tremont, the best performing hedge funds were those dedicated to û wait for it û emerging markets, up 9.3% YTD, and multi-strategy funds, up 12.4%. Other sub-sectors had more ho-hum performance, but only one has lost money this year: dedicated short funds are down -2.2% YTD, and -11.8% on a 12-month basis. This strategy also had a poor 2006, and also continues to exhibit the highest volatility (8.5% over the past 12 months).

But investors donÆt expect dedicated shorts to do well in the kind of stock market acrobatics weÆve seen in the past two years. The benchmark histories show that itÆs when everything else falls apart that this strategy comes into its own. Unfortunately for them, however, the current market turmoil has yet to impact the stock market: the bubble now unwinding has been in bonds.