Fund Objective

The Fund's investment objective is to provide capital growth and income.

View on Past Performance

Corporate bonds continued to underperform government bonds, and as a result, the fund produced a negative return but outperformed its benchmark. We maintained a defensive position in anticipation of weaker credit markets, and safe-haven demand for government bonds. The underweight exposure to corporate bonds and an allocation to government bonds were positive.In addition, while risk aversion dominated markets, short dated bonds outperformed the long end of the yield curve, which benefited the portfolio. Short positions in companies that were expected to underperform during more difficult economic conditions also contributed. The fund held no exposure to any defaulting securities, CDOs or US sub-prime related assets.

Future Expectations

Tighter credit conditions will continue to make it more difficult and expensive for companies and consumers to get finance. Although higher food and energy prices are putting upward pressure on inflation in the near term, we believe that slowing growth will ease inflationary pressures later in the year, making it easier for the Bank of England to cut rates further.Given that the downside risks to the economy and financial markets look set to continue, our defensive strategy of underweighting corporate bonds and overweighting government bonds will remain. We remain underweight in bonds which we believe will be vulnerable in a slowing economy.

Fund Details