Fund Objective

The Standard Life Investments UK Equity High Alpha Fund aims to provide a balance of long term growth with some income over the longer term by investing in a relatively concentrated portfolio of shares of companies listed on the UK stock market.

View on Past Performance

UK equity markets suffered from further severe volatility in January, as negative economic data in both the UK and the US saw investors move sharply away from equities. Further problems within the financial sector, especially within banks and bond underwriting firms, saw some of the most volatile trading sessions in 25 years.The shock 0.75% interest rate cut by the US Federal Reserve sparked further speculation that the US economy could be in a much worse position than previously thought. The market recovered some of its losses on the month as some investors sought buying opportunities amid the volatility, but the major indices stayed firmly in negative territory for the month.The Fund returned -7.88% for the month, compared to its peer group average of -9.45%. In a volatile and negative month for UK equities as a whole, the Fund held up somewhat better than many in the peer group as some economically sensitive stocks recovered.Our holdings in Invensys, British Airways, Grainger and Cattles, which were all negatives for December, turned positive during January. Finance related stocks stayed firmly negative for the month, dragging down our holdings in Moneysupermarket.com, Royal Bank of Scotland and New Star Asset Management.We sold out of solar cell manufacturing company PV Crystolox after a strong run led the valuation to begin to look stretched - margins do not look sustainable at current levels. We sold financial company Cattles after the stock recovered some of its previous losses towards the end of the month. Likewise, we eliminated our holding in New Star Asset Management on a deteriorating outlook for the company.

Future Expectations

In the short-term, the credit crisis and further evidence of a slowdown in the US and the UK will spark further volatility in UK stock markets. However, falling interest rates, accompanied by an moderation of the credit crisis, may help provide a soft landing for the consumer and trigger a wider market recovery.The volatility has also provided buying opportunities and the prospect of a reinvigoration of global M&A activity as cash-rich companies look to put their balance sheets to work at attractive valuations. The UK equity market remains underpinned by strong corporate profitability as well as strength in the resources sector, with industrial and mining stocks continuing to perform well.

Fund Details