Fund Objective

To provide capital growth over the long term.

View on Past Performance

The portfolio rose in value through to the end of August, as investors hoped the Federal Reserve Board would gain control of the parlous financial system. However the collapse of Merrill Lynch into Bank of America's arms and the subsequent failure of Lehman was enough to destroy investor confidence in September.Although the fund has been underweight banks the underperformance of our UK banks exposure was a significant detractor on a relative basis. Another factor from a relative performance standpoint was the strength of the US dollar. With the proportion of the portfolio in the US at approximately half the index, the currency move was a major negative for relative performance.Our Continental European exposure was below the index. In this region we avoided some of the big negatives such as Fortis, but Dexia was in the portfolio with similar funding problems to Irish banks and UK banks, and it was sold before its final bail out. Our Investment bank exposure included Macquarie Group and Goldman Sachs, but not Lehman Brothers.At the total level, the fund underperformed the MSCI World Financials index this quarter in large measure due to the panic conditions of September.

Future Expectations

Equity market valuations now look attractive; however, uncertainty over the outlook for earnings and dividends may contribute to further volatility.

Fund Details