Fund Objective

There is no fund objective available from this fund manager.

View on Past Performance

The high yield bond market experienced continued weakness in February, driven by the ongoing effects of the credit crisis and concerns over a possible recession in the US. In this environment few investors are interested in taking on risk and investors who have borrowed to invest have been reducing their positions, resulting in more sellers than buyers.The Higher Income Fund returned -3.28% during the month, compared with the IMA Sector average return of -1.94%. The increased level of volatility prevalent over the month had a negative impact on our holdings in high yield bonds. Several peer group funds have benefited from a lower weighting in high yield bonds. Our exposure to cash and gilts has helped to offset the impact of volatility in the high-yield sector.We reduced holdings in CellC and Ineos, while Hombach, Kronos and SGL Carbon were sold. Overall we are maintaining an overweight position in telecom and cable companies, while remaining underweight in autos and chemicals.

Future Expectations

The fundamentals for the European high yield companies have not changed much. Several companies issued quarterly earnings results and few disappointed. Default rates have begun to creep up in Europe, but this will be more of a problem in 2009 than 2008. We believe the level of defaults will rise much faster in the US market than in Europe, although this could have some negative effects on high yield investor sentiment overall.

Fund Details