Risk assets had a very poor month in September, with equity indices showing heavy declines amid substantial volatility. Equities declined early in the month on a raft of weak economic datat, particulary from the Euro zone, though stocks did briefly rally as the US government bailed out Fannie Mae and Freddie Mac. Positive sentiment was, however, very short lived, as attention turned towards Lehman Brothers, AIG and the potential for widespread financial contagion.Investor sentiment remained poor as Lehman filed for bankruptcy protection, AIG received a two-year lifeline from the US government (giving them time to sell of treir assets at non-fire sale prices), and weak economic data )though largely ingnored by the market) continued to filter through. Other casualities indluded Wachovia, Fortis , Dexia, Hypo Real Estate, Bradford&Bingley, and HBOS.Non-functioning capital markets have given otherwise healthy companies serious liquidity concerns, as institutions are moved to hoard cash in an attempt to remain solvent. At the time of wrtiting, government intervention from the US and UK is in place to alleviate these issues, whilst countries within the Euro zone are operating on an ad hoc basis, given the variety of problems facing each individual state.Within the portfolio, we reduced our equity exposure, whilst maintaining a preference for companies with strong balance sheets and robust credit metrics.
399.40p
