Fund Objective

To achieve capital growth.

View on Past Performance

During the month we once again held as much cash as possible, but towards the end of the month began to add some stocks to some new themes based on a view of how the economic fundamentals will change in the light of the financial crisis.There are new themes emerging, and we have added the pricing power of capital (Capital as a strategic asset) and Pay As You Go Consumption. Ironically, the consumer is relatively robust, although not for products that require the taking on of debt. Thus reliability of earnings is probably strongest in consumer non-durables.October proved to be the worst month so far this year for investors as distressed selling meant stock markets fell around the globe. In capital markets, deleveraging, by hedge funds in particular, continued unabated and hit company share prices regardless of fundamentals.These twin influences meant that as expectations fell sharply for companies reliant on corporate capital expenditure, especially holdings in Energy and Scarce Resources, and Business to Business, share prices were hit by panic about a sudden fall in activity and distressed selling of hedge fund favourites. Market positioning remains a key driver to share price performance for now.

Future Expectations

The credit cycle unwind has started to impact the real economy as activity grinds to a halt and capital expenditure stalls.We now expect several quarters of negative growth in the US, and an acceleration in company profit warnings as financial and operating leverage works in reverse at an accelerated pace. Going forward the focus will be on companies with strong balance sheets, cash flows and ability to grow market share from this time of distress.

Fund Details