Fund Objective

To achieve long term capital growth through the active management of a portfolio invested primarily in a broad range of UK equities.

View on Past Performance

The summer rally in the UK equity market came to a grinding halt in September as investors tried to come to terms with the extent of the problems facing the global financial system.During extreme volatility, equities struggled to price in the nationalisation of US mortgage providers Freddie Mac and Fannie Mae, the bankruptcy of Lehman Brothers, the sale of Merrill Lynch to Bank of America and the proposed acquisition of HBOS by Lloyds TSB. Against this backdrop, the FTSE All-Share Index fell by 13.2% over the month, with the FTSE 250 Index (-15.6%) underperforming and the FTSE 100 Index (-12.9%) in line with the broader market.The fund performed broadly in line with its peer group but lagged the benchmark index. Key detractors from performance were the ongoing significant weakness in the oil & gas sector and not enough exposure to the more traditional defensive areas of food producers, beverages and multiutilities. Positive relative performance came from our holdings in other typically defensive areas, such as pharmaceuticals, non-life insurance, tobacco and electricity.

Future Expectations

Changes to portfolio positioning included further reduction in the exposure to late cycle businesses, where we believe the outlook is set to deteriorate sharply as the global economy slows further. This was achieved through sales of companies such as Cookson, Charter, Weir and Amec. We also continued to reduce resources exposure through sales of Lonmin, Xstrata and Cairn EnergyAgainst this, we continued to increase our allocations to businesses which should be less affected by an economic slowdown, such as Imperial Tobacco and Scottish & Southern Energy. New positions were taken in food retailer WM Morrison and global bank HSBC.

Fund Details