Fund Objective

The fund aims to achieve an income in addition to capital growth through an actively managed combination of global equities, bonds and cash.

View on Past Performance

November was a relatively quiet month. Global equity markets fell slightly. Peripheral European bonds performed well but gilts and US Treasuries posted slightly negative returns. Emerging-market bonds fell sharply. Financial bonds continued their good run but investment-grade credit generally fell, following weakness in government bond markets. It was, meanwhile, another positive month in the high-yield market.The fund held up well in November, rising by 0.5% while its composite benchmark fell by 0.7%. Over the year to date, it has returned 15.9% against a return of 9.0% from the composite index.The IPO market has been very active. In November, we participated in the float of Merlin Entertainments, which operates a global network of theme parks including Legoland, SeaWorld and Madame Tussauds. We took profits in a number of more cyclical or emerging-market stocks. On the bond side, we deployed new cashflow in a number of new holdings including América Móvil, Barclays, Nationwide, Univeg and Vivacom. The percentage of the fund invested in high-yield drifted a little higher as a result.We have also initiated a small position in US index-linked Treasuries (TIPS). This may grow should yields rise further. We feel a real yield of 1.6% is comparatively attractive. Interest rates are going to stay low for a long time, so this yield stood out, especially as the yield was 0.4% just six months ago.

Future Expectations

On the equity side, some of the high-quality dividend stocks that form the cornerstones of so many income funds have become expensive. Regionally, Europe is no longer cheap, while US stocks are dear. In short, bargains are harder to find.There are still companies that will pay attractive dividends, but investors may have to look harder or go further afield to find them. The bond market, meanwhile, seems set fair. Default rates are likely to stay low, which will support high-yield bonds. Investment-grade issuance is strong and will continue to be strong while interest rates remain low.However, we still expect yields on government bonds to rise over the next few months as tapering continues - hence our policy of keeping the fund's duration fairly low. Financials are rehabilitating themselves and will remain a core part of the portfolio. For now, though, we remain alert to signs of this trade having run its course.

Fund Details