Fund Objective

The investment objective of the Neptune UK Special Situations Fund is to seek to achieve capital growth by exploiting special situations and investing principally in UK equities considered to be undervalued.

View on Past Performance

It was an eventful quarter to say the least. The credit crunch migrated into full "banking crisis mode", global GDP forecasts continued to slide downwards and global equity markets saw unprecedented levels of volatility.Unsurprisingly, the banking sector grabbed most of the headlines as the interbank lending markets seized up, more financial institutions failed (including heavy weights such as Lehman Brothers and AIG) and government rescue plans around the world were hurriedly put together to avert a global financial meltdown.In terms of the stockmarket, the momentum trade that saw energy and mining shares significantly outperform the broader market for a sustained period finally came to an end in mid-July, as commodity prices found reverse gear due to slower global growth. In many ways this was one of the few positives to come out of the quarter, as lower commodity prices should help ease inflationary pressures, allowing central banks around the world to cut interest rates.In terms of performance, it was another excellent quarter relative to the benchmark and the peer group. During the quarter the Fund returned -10.67% compared to the FTSE All Share Index return of -12.18%. The Fund also outperformed the competition, where the average fund in the IMA UK All Companies sector returned -13.78%.Year-to-date, this places the Fund in the 1st quartile of the UK All Companies universe. The majority of this outperformance can be attributed to our significant underweight in the mining sector, which fell -44.1% over the quarter.

Future Expectations

In light of the uncertain macroeconomic environment and poor credit markets, we remain focused on large-cap stocks; high quality business franchises, strong balance sheets and strong cashflow generation (sufficient to fund future growth whilst maintaining dividends where applicable).At the sector level, the main change was increasing our exposure to financials, where we see a number of high quality companies emerging from the credit crunch in a stronger position, in favour of energy and materials, which are likely to suffer from lower global growth expectations.

Fund Details