Fund Objective

The Fund aims to produce an attractive level of income commensurate with security.

View on Past Performance

UK gilts performed strongly in October with 2 year yields falling by 1.08% to 2.93%. The yield curve steepened aggressively, however, as the 10 year yield rose marginally from 4.45% to 4.52%. Deteriorating economic data and risk aversion in global markets provided support for bonds, especially at the front end of the yield curve, as UK base rates were priced lower.Money market steepened as yields eased across the curve by 140bps in 1 week to 40bps in 1 year. There is still a premium of over 100bps between 3 mth LIBOR and UK base rate, which is likely to remain until confidence returns to the Interbank market, which will then improve liquidity.

Future Expectations

We fully expect rate cuts to continue globally. Severe weakness in the financial services sector further reinforces this view. We expect aggressive policy stimulus with a rapid decline in base rates to 2.75% by mid 2009, and for rates to remain low for longer than the market is currently pricing.

Fund Details