Fund Objective

The fund aims of delivering returns as a mixture of income yield and capital appreciation.

View on Past Performance

June proved to be a much more challenging month for securities markets than had been the case recently. Bond markets saw sharp declines as rising interest rates (in Europe), and a re-assessment of the outlook for growth and inflation finally caused investors to demand higher returns in an environment of increasing risk. Equity markets, notably in more developed regions, were unsettledby the movement in bonds and sharp falls resulted, particularly in medium sized companies that had performed strongly in recent years. A rise in the oil price and optimism on the duration of the commodities cycle helped the major oil and mining companies to advance and this tended to conceal the extent of underlying nervousness.Although the performance statistics are somewhat distorted by period end market movements, the fund was negatively impacted by an overweight exposure to UK and European equities. A change in the structure of the benchmark APCIMs index from 18th June affected relative performance also. This change saw the introduction of hedge funds and commercial property into the asset mix of the index, matched by reductions in UK equities and bonds.Cyclical considerations suggest a cautious approach here also. The rise in gilt yields was used as an opportunity to increase the funds exposure. The holding in Treasury 4.75% 2015 was increased and a new holding in Treasury 4.75% 2020 was introduced to extend the duration of the portfolio.

Future Expectations

Risk awareness has certainly increased in bond markets and although there has been some reaction in equities, the continued rise in emerging markets still indicates a high level of optimism. Rising interest rates and stubborn inflation pressures may threaten this optimism in due course and the more cautious structure of the fund and some further diversification continue to be appropriate.

Fund Details