During September, Marlborough Ethical (-11.7%) outperformed the FTSE All Share Index (-13.2%). We participated in the placing in Lloyds TSB to aid its proposed takeover of HBOS. These have since been sold for a small profit. We also sold our holdings in HBOS, Alliance & Leicester and RBS on concerns over their exposure to the UK property sector and because prices rose when short selling was banned. We opened a position in Xstrata (+15%) taking advantage of market weakness.The holding in large companies (39%) remains above our usual discipline of 1/3 split evenly between large, medium and small companies. This is due to greater stability and international earnings of FTSE 100 companies during these difficult times. The fund also has cash of 23% to take advantage of the weak market conditions.The market proved exceptionally volatile ending the month sharply lower. Recent events in financial markets have been unprecedented. Lehman Brothers has gone; the large US insurance Company AIG has been effectively nationalised; Freddie Mac and Fannie Mae which supply over 50% of the US mortgage market were rescued; Merrill Lynch was rapidly taken over by Bank of America; the US Government is to buy bad assets from banks via the Troubled Asset Relief Programme;closer to home Lloyds TSB was quick to agree to takeover HBOS; Fortis was taken over by BNP Paribas; Ireland has guaranteed all savings; the Icelandic Krona fell 45% as the problems of its banks threatened to swamp the entire economy.As a long only fund which operates mainly in wholesale markets and hence is supportive of British industry, we have little sympathy with short sellers. Nevertheless we would put more of the blame for current financial woes at the door of irresponsible bankers than market operators.
96.25p
