Fund Objective

Seeks to provide long term capital growth.

View on Past Performance

The global markets have gone through considerable changes since our last report. The equity markets, which had become extremely stretched in terms of valuations, have lost ground as investor confidence has been shaken by turbulence in the financial sector and increasing evidence that global economic growth is slowingThis was good news for bonds, as a flight to quality produced strong results for sovereign obligations. Most of our activity during this period was at the broad asset class level. We gradually reduced the portfolio's equity weighting from overweight to underweight relative to the peer group. At the same time exposure to fixed interest funds was raised from underweight to neutral.We were fairly active in trading fund holdings. Some changes were made on performance grounds, such as replacing AXA Framlington Monthly Income with PSigma Income and IXIS Loomis Sayles US Growth with Skandia Specialist American (Acc).Increased fixed interest exposure led to new holdings in Legal & General All Stocks Gilt Index Trust and Baillie Gifford High Yield Bond. Finally there were some new holdings added for diversification purposes, such as Schroder AS Agriculture.

Future Expectations

Trust lies at the heart of the efficient functioning of the modern global financial system. Sure, there are periods of uncertainty, or boom and bust, and instances of fraud, rogue traders and the like - but there is also an expectation that, overall, the system will continue to function effectively.However, as we move further into 2008 and the scale and scope of this century's financial bubble emerges, there is growing mistrust between counterparties as they question each other's ability to pay for, deliver and value assets. This mistrust lies at the heart of the extreme volatility witnessed in the first quarter, and the seemingly ridiculous valuations (both cheap and expensive) opening up in some asset classes.The collapse of the financial system is in nobody's interest - a thought not lost on the central banks of the developed world, which have, in varying degrees, poured liquidity at the problem (notably the Federal Reserve). This has brought the markets back from the brink, but it would be foolhardy to think that the deflation of the greatest financial bubble in living memory has run its course, or that there will not be a cost to the real economy.Therefore, we remain cautious in our portfolios. Indeed, we recently increased our cash weightings at the expense of equities, and we continue to recommend an underweight equity, neutral fixed interest and overweight cash position.

Fund Details