Fund Objective

The objective of the Fund is to achieve a competitive level of income, with capital growth.

View on Past Performance

Despite the fact that house prices are continuing to fall, the latest statement from the Bank of England has shown that there is little flexibility to further reduce UK interest rates at present, due to ongoing inflation fears.Therefore, it is understandable against such a background, that consumer confidence is falling to levels not seen for many years, with the consumer cutting back on spending across a wide range of non-essential activities.In the circumstances it was not surprising that investors exhibited rising levels of risk aversion, shunning volatile asset classes in favour of cash and Government Bonds. Over the period, the yield premium for Investment Grade Bonds over Government Bonds widened significantly.For example in 2007 the average yield on such a bond from a corporate issuer was 6.75% against 4.75% on a Gilt. Over the past six months these figures have changed to 8% and 4% respectively, in effect increasing the cost of corporate borrowing by over 2%. As a result, we see increasing value in Corporate Bonds and would expect the yield premium to narrow as investors begin to distinguish between good and bad credit risks.The summer months were extremely volatile with global markets suffering a sharp sell-off in July, as investors began to reassess the severity of the sub-prime fall out. Volatility subsequently continued in the following months, with the FTSE 100 touching a low point for the year of 5858, on 16th August.

Future Expectations

Looking ahead, in certain respects the building blocks for a recovery in the US market are being put in place. Having been the first major economy into the current downturn, the US is likely to be the first to recover.This, allied to the proactive policy response from the authorities and the benefits that will come through from recent dollar weakness suggest that recent relative out-performance will continue.

Fund Details