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 -13.1% 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 and proceeds moved to more-defensive areas. In the overseas equity portfolio, fears regarding global growth saw weakness in our energy- and commodities-related holdings, while the financial markets crisis saw "financials" as the biggest sector-level detractor.In contrast, IT companies were more resilient, with good results from Hewlett-Packard and Cisco Systems. The portfolio underwent a major repositioning in September, making it considerably more defensive via a decrease in cyclical exposure and a reduction of our earlier bias away from the US. Going forward, we favour higher-quality companies with clear, strong and sustainable earnings growth.
415.35p
