Fund Objective

Seeks to provide maximum capital growth.

View on Past Performance

The global markets have gone through considerable changes since our last report. The equity markets, which had become extremely stretched in terms of valuations, have lost ground as investor confidence has been shaken by turbulence in the financial sector and increasing evidence that global economic growth is slowing.Most of our activity during this period was at the regional allocation level. The UK and Europe were moved to underweight relative to peers, leaving only Asia and Global Emerging Markets with above average regional exposures. Cash was raised to moderately overweight.The broad characteristics of our equity holdings did not change much during this period. We continued to favour larger, quality growth orientated funds in the belief that these would weather an economic downturn better than more cyclically orientated value funds.We were fairly active in trading fund holdings. Some changes were made on performance grounds, such as replacing AXA Framlington Monthly Income with PSigma Income and M&G North American Value with UBAM Neuberger & Berman Value. Other holdings, such as Artemis Capital, were sold as part of the reduced regional weights.There were also some new holdings added, primarily for diversification purposes, such as Thames River Global (Nevsky) Emerging Markets.

Future Expectations

Trust lies at the heart of the efficient functioning of the modern global financial system. Sure, there are periods of uncertainty, or boom and bust, and instances of fraud, rogue traders and the like - but there is also an expectation that, overall, the system will continue to function effectively.However, as we move further into 2008 and the scale and scope of this century's financial bubble emerges, there is growing mistrust between counterparties as they question each other's ability to pay for, deliver and value assets. This mistrust lies at the heart of the extreme volatility witnessed in the first quarter, and the seemingly ridiculous valuations (both cheap and expensive) opening up in some asset classes.The collapse of the financial system is in nobody's interest - a thought not lost on the central banks of the developed world, which have, in varying degrees, poured liquidity at the problem (notably the Federal Reserve). This has brought the markets back from the brink, but it would be foolhardy to think that the deflation of the greatest financial bubble in living memory has run its course, or that there will not be a cost to the real economy.Therefore, we remain cautious in our portfolios. Indeed, we recently increased our cash weightings at the expense of equities, and we continue to recommend an underweight equity, neutral fixed interest and overweight cash position.

Fund Details