Fund Objective

To provide a total return to the investor on a medium risk basis over the medium to long term.

View on Past Performance

When the "bail-out" plan, as it was inappropriately sold to the US consumer, was announced after the European markets closed on Thursday 25th September I felt that a series of events that started in late September 2007 by the US authorities to correct the credit problems was culminating in a move that would, finally, restore liquidity. It is a matter of record that I have always felt that the Federal Reserve and the US Government together would "do what was required" to solve the problem.Nothing I have seen since last September has changed my mind on this. Therefore, I took advantage of the fact that markets operate in different time zones to add to my US holdings in the Opes Growth Fund on Friday 26th September. I remain convinced that there are better places in the world to invest, but that America will be the first economy to recover from the economic slow-down and therefore it's stock market will be the first to rise.You can therefore imagine my frustration at the way the "bail-out" was sold to the citizens of the USA and that the House of Representatives chose to vote it down. I thought the whole thing was miss-managed and that it would be sorted in due course. It is therefore encouraging that things now look to be moving in the right direction with the positive vote from the Senate on 1st October.Fundamentally the FTSE 100 Index has gone nowhere in the past 11 years (Value on 15/07/97 = 4,899; value on 30/09/08 = 4,902). The UK equity market was not above its long-term trend line in July 1997 but we saw it rise through that trend line and shoot way above it by March 2000 before falling back (the TMT crash).Recent market (technical) issues and a slight slow-down in global GDP growth rate (with some countries still far above our average of 3%) have seen very dramatic falls which make no sense in fundamental corporate terms. Therefore we are now languishing very, very far below the long-term trend line for equity markets.

Future Expectations

We have seen Asian countries and Emerging Markets tackle their rising inflation issues before we in the west have done so. Their low levels of consumer borrowings and low corporate leverage will stand them in good stead. China's inflation rate at the beginning of this year stood at 12%, it is now below 5% and they have reduced their interest rates for the first time in 6 years. Others are heading the same way.It seems highly likely that there will be some further forms of co-ordinated action between central banks to keep the liquidity stimulus high in the credit markets. Without this the credit crunch looks likely to exacerbate our slowing growth. Governments need consumers to spend and businesses to make profits so that they can collect taxes. They would rather lend money to the financial system than announce massive tax rises at the present time.It might even be the case that we see some coordinated interest rate cuts. After all, a little inflation now, let's say 5%, will reduce the value of the outstanding debt and inflate asset prices naturally. 5% inflation adds 27% after only 5 years and 55% after only 9 years; the erosion of the real value of your outstanding debt is the same.

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