Fund Objective

There is no fund objective available from this fund manager.

View on Past Performance

September brought an avalanche of unprecedented bad news with the collapse of Lehman Brothers and AIG and the rescue takeover of HBOS amongst the most noteworthy.This background led September to be the most volatile month since records began with share prices performing a full cycle in an afternoon rather than the usual five years! This casino like environment was moved by fear and rumour with fundamental investment criteria thrown to the wall. The activities and values of long term investors were rendered irrelevant as short termists held sway with trades of the lowest quality.Governments were quick to react with massive bailouts, guarantees and many 'arranged' financial marriages. They also introduced immediate legislation to curb short term speculators.Commodity prices eased - oil peaked at $146 in July then fell significantly, settling at around $100 per barrel by quarter end - as speculative money was withdrawn and growth forecasts were pared back.Equity markets were weak with the UK the worst of the mainstream due to its high financial content. Government bond markets rose as risk appetite diminished. Emerging markets were also very weak. From an underweight position we began to move money out of international bonds and into equities, where we are now overweight, following significant weakness.

Future Expectations

We expect lower interest rates and the reduction in commodity prices to be a positive catalyst once the short term fog clears. The fundamental objective for financial markets is for interbank spreads to come down to encourage banks to lend. Central bankers now have no choice but to cut interest rates to offset the negative effects of a blocked banking system.Although growth will slow we do not foresee a depression - governments will spend, interest rates will come down and easing commodity prices will boost activity.The massive concerted financial package should save and re-activate the banking system. Equities are very cheap and can withstand downgrades to earnings that slower economic growth will bring.The US, as the first country to turn down and acknowledge the problem, is likely to lead markets to recovery. If the US authorities continue to work closely with major foreign governments, the US recession should be short and growth should be positive by Q209. Financial markets are likely to anticipate this and recover ahead of it.UK: the corporate sector is strong financially and can withstand significant earnings downgrades, whilst the UK equity market looks outstandingly cheap on a single figure price to earnings ratio and an attractive yield compared to gilts.

Fund Details