Fund Objective

To achieve long term capital growth and income.

View on Past Performance

During the course of the month we saw the takeover of Fannie Mae and Freddie Mac by the US government, the collapse of Lehman Brothers, the US government's acquisition of an 80% stake in American International Group, the proposed takeover of Merrill Lynch by Bank of America, the conversion of Goldman Sachs and JP Morgan to commercial banks, Bradford and Bingley nationalised and Lloyds Bank (with the support of the UK government) propose a takeover of HBOS.Following these events the FTSE100 Index traded down 13% over the month. The 11% fall in the first half of September followed by a one day rally of 9% serves to illustrate the level of short term volatility. Exposure to international banking companies was reduced and broad UK equity exposure was increased through the purchase of the FTSE100 Index iShare. Alongside this Index position an option overlay strategy has been established.The combination of Index and option provides the Fund with reduced downside risk whilst maintaining upside potential. An element of portfolio protection has also been introduced with the purchase of put options.

Future Expectations

While valuations are attractive and tactical indicators are pointing towards capitulation levels, we are taking a cautious stance for now. In the near-term downside risk will remain whilst financial uncertainty exists. The support from the world's government and financial authorities is clear but the details and impact are not.

Fund Details