Fund Objective

To provide income with the prospect of capital growth.The Fund is hedged back into sterling.

View on Past Performance

While the credit crisis marked its anniversary this quarter, the speed and force of its impact accelerated in September, creating volatility, corporate events and government intervention that will have lasting effects. Short term markets have frozen and central banks globally have responded with large injections of liquidity.Most fixed income markets other than governments and agencies were negatively impacted by the events of the quarter. In the portfolio, we benefited from being long the front end of the UK curve, and from curve steepening positions.The portfolio was positioned for European bond outperformance versus US Treasury securities, which benefited performance, and the overall contribution from the Japanese positioning was also positive. Investment grade corporate spreads widened, particularly at the end of the quarter, and the funds allocation detracted from performance, with the largest underperformance coming from our holdings in financial names.

Future Expectations

A deeper and more protracted slowdown in global growth is likely to reemerge as the dominant theme for investors in the medium term. The growth outlook has deteriorated on a relative basis, implying that the scope for monetary easing has increased. The outlook for credit remains poor.The current deleveraging, illiquidity in the system and mark to market volatility are confidence sapping and investors continue to sit on the sidelines, building up cash positions. Likely catalysts for an improvement will be time, improving Libor rates, stabilisation of house prices and signs of economic recovery.

Fund Details