Fund Objective

To achieve over a medium-term horizon, higher returns than those available from money market instruments denominated in Sterling.

View on Past Performance

The fund struggled, due in part to the extreme market dislocation and prolonged volatility. We maintained very conservative positions in the stock portfolio, with minimal exposure to financials, but were damaged by the rally in the markets in the second half of July. In August, we again reduced our equity exposure and remained very cautious on financials, but suffered as the result of both stock specific weakness and also certain sector allocations.In particular, basic material and energy stocks fell sharply and financials rallied in a vicious rotation. Into September, we remained at the lower end of our equity risk allocation with defensive stock names and a bias towards developed over emerging markets; however, any allocation to equities again detracted from performance.Convertible bond performance was also poor as the introduction of short selling restrictions forced many arbitrage managers, who are typically short stocks and long convertible bonds, to liquidate their positions, leading to massive oversupply.

Future Expectations

We expect over the next few months to maintain low levels of risk within the fund, conscious that performance will be rebuilt steadily as we see some stabilisation in markets.We expect to see some rebound from convertibles in the next few months, although there may be further turbulence in the very short term, and we anticipate a short- term bounce in equities as the fiscal response to the crisis takes effect.We are looking for some short-term weakness in European government bonds, when we will increase our positions and further diversify the portfolio.

Fund Details