Fund Objective

The Fund aims to achieve an above average level of income through investing mainly in a high quality portfolio of sterling denominated fixed interest securities.

View on Past Performance

The bankruptcy of Lehman Brothers in September marked the beginning of a new phase amidst the credit turmoil. The $85bn (US) bail out of AIG failed to comfort investors as fears of a systemic crisis reached a new level of severity due to extremely stressful money market conditions.European banks were also in turmoil. Governments showed strong support by providing huge injections of liquidity into Fortis and Dexia, whilst Bradford & Bingley was nationalised in the UK. Late in the quarter, the Irish government announced it would guarantee all deposits (retail, commercial, institutional and interbank), covered bonds, senior debt and dated subordinated debt (lower tier II).In this environment, September was the worst ever month for credit markets in terms of performance, especially the Financial sector. Liquidity dramatically diminished.To decrease the risks of collateral damage, we reduced the fund's financial exposure by selling AIG and Morgan Stanley.

Future Expectations

Investor focus on the Paulson Plan should give banks some flexibility. Recent government intervention and commitment should also help markets regain some confidence.We will continue to closely monitor the fund's financial exposure and we will wait for the reopening of the primary market, where new issues are sold, to increase fund exposure.

Fund Details