The third quarter of 2008 will be remembered as one of the most tumultuous periods in financial history. The financials sector took centre stage, with instability leading to heightened volatility, regardless of asset class or geographic region, and a weaker global economy. Against this background, the Fund returned -14.8% for the three-month period.The Fund's UK equity portfolio suffered through the start of the quarter as sector rotation saw a substantial rebound in financial companies, and a significant sell-off in oil prices and related stocks.Relative performance was further impacted amid tumbling share prices in September, as resources stocks endured weaker commodity prices, and our below-benchmark weighting in banks was offset by poor stock selection - preference for RBS proved disappointing, along with our underweight position in HSBC, which performed well on the perception that it is safe and well-capitalised.Activity has seen a flattening of risk levels, with oil and mining exposure reduced selectively into strength, when available, and proceeds moved to more-defensive areas. Globally, equity markets recorded double-digit losses in local-currency terms as September's events brought intense volatility and stockmarket declines.The positioning of the Fund's overseas equity portfolio reflected a slant towards quality in both regional and style decisions, as we sought exposure to the US equity market given its diverse composition and relatively high earnings characteristics. Despite attractive valuations, we are least positive on Europe, where we perceive the highest risks from earnings downgrades.
