The global fi nancials sector is experiencing its most radical shake-up in decades. Banks are facing a solvency crisis and recapitalisation has become impossible without massive government assistance. History will judge whether this intervention can restore confi dence in the fi nancial system and ultimately smooth the current economic slowdown.But the scale of the crisis should not be underestimated. The collapse of Lehman Brothers is a case in point and the US investment banking sector, which played an important role in lubricating the US economy, has been all but obliterated. This speaks of a long and drawn out road to recovery for both the fi nancial sector and the global economy.For investors in the sector, rescue takeovers and nationalisation mean the destruction of shareholder value. Second guessing the likely winners in the sector would be highly dangerous and, for over a year, we have employed a number of tactical measures with the aim of removing the Fund from harm's way.For the foreseeable future we will continue to favour government bonds in the US and France. These are adding value due to the remarkable fl ight to safety and the prospect of interest rate cuts as the economic downturn becomes more severe. We also hold a signifi cant cash position which we actively manage, holding those currencies likely to show relative strength at any given time.
828.04p
