Fund Objective

To achieve over a longer-term horizon higher returns than those available from money market instruments denominated in Sterling.

View on Past Performance

We actively managed the equity exposure of the portfolio, ranging from a cautious position of 19% to 40% more recently, reflecting our hopes of a rebound in equity markets. July saw energy and commodity stocks suffering their worst monthly performance since 1980, and financials rallying sharply.At this point, energy and commodity stocks were scoring strongly in the Dynamic screens, whereas financials, particularly on earnings measures, did not yet look appealing. This style rotation in the market causes stock-picking alpha to suffer in the short term. In September, the market was trading on a combination of extraordinary events, from the bankruptcy of Lehman Brothers to the announcement and subsequent rejection of the Troubled Assets Relief Program (TARP).While we believe equities offer value on a fundamental basis, our equity exposure in September detracted from performance. Convertible bond performance was also poor as the introduction of the short selling restrictions forced many arbitrage managers, who are typically short stocks and long convertible bonds, to liquidate their positions leading to massive oversupply.

Future Expectations

Moving forward we remain positive in equities in the short term in anticipation that there will be sufficient stimulus from governments to stabilise markets. Longer term the picture is less clear, and whilst valuations remain attractive, sentiment is clearly a stronger driver in the current market and we may see an extended period of equity volatility.We think that bonds are likely to remain well supported, particularly in Europe, and that there are opportunities in currency and convertible bond markets.

Fund Details