Fund Objective

To aim to provide capital growth.

View on Past Performance

European equities performed poorly during November, with many markets losing over 4%. Volatility was also high. In fact, at the worst point the declines were approximately double the end result for the month. Economic releases highlighted risks to growth and investors sought refuge in the bond markets, resulting in a marked decline in yields (increase in prices). We would view this as a good indicator of fear and believe sentiment has now become quite bearish.Financials and consumer discretionary were the biggest detractors from performance. The overriding characteristic was exposure to an economic slowdown, either via the consequences of the current credit crisis or a general lack of consumer spending. These fears dominate market thinking at present and valuation metrics have taken a back seat when assessing investment exposures.The traditionally more defensive areas of consumer staples and healthcare did well, alongside telecoms and utilities. Good performing stocks were Unilever, Sanofi-Aventis and France Telecom. Acergy and Fortis were disappointing, despite the purchase of a 4.2% stake in the latter by Chinese group Ping An.We reduced our exposure to the oil majors as we became concerned about the level of expectation built into the stocks around an unrealistically high oil price. We also sold out of our holdings in Bilfinger & Berger and Siemens. We took advantage of weakness to add to our holdings in National Bank of Greece and Fortis.

Future Expectations

Approaching year-end, the outlook for European equity markets is more uncertain than at any point this year. While the recent sell off looks overdone and may prompt a sharp rally into the year end, it is difficult to imagine the news flow improving soon. Such negative sentiment is likely to burden any positive corporate and economic data, making life turbulent in the coming months.

Fund Details