Fund Objective

The aim is to achieve long-term capital growth in excess of inflation.

View on Past Performance

Unprecedented deleveraging has continued across capital markets throughout Q3. With the period culminating in a widespread loss of confidence in the system, September 2008 will go down as one of the most chaotic months on record.By our reckoning, a good two dozen major market events have come to pass since 8 September - the day the US government effectively nationalised Fannie Mae and Freddie Mac - leaving July and August looking relatively pedestrian by comparison.Some of the lowlights include the bankruptcy of Lehman Brothers, the bailout of AIG, the failures of Washington Mutual and Wachovia, the demise of the remaining three US investment banks (Merrill Lynch, Goldman Sachs and Morgan Stanley), rescues of Fortis, Dexia, Bradford & Bingley Â… the list goes on.Accordingly, chronic strains in the commercial paper market have all but guaranteed a recession in the US and Europe. Indeed, by any reasonable measure, we are already in one. Its severity now depends on how quickly government and central bank action can restore confidence, get banks recapitalised and lending again. Efforts thus far have proven unsuccessful.A 40% peak to trough decline in the oil price is clearly one of the precious few positives to speak of during the quarter. Assuming this trend doesn't reverse (and in the absence of new news, we don't think it will), this will ease the way for interest rate cuts in the fourth quarter. China set the ball rolling in September with a symbolic, albeit modest, reduction.

Future Expectations

In the immediate term, policymakers are driving financial markets. Whether recession degenerates into something more severe depends largely on what they do next.Q3 earnings for most industries will likely be dreadful. We also expect guidance for 2009 to be downgraded materially. As we write, markets are in capitulation mode. We expect a material bounce - once the panic subsides.

Fund Details