Fund Objective

The investment objective of the Scheme is to acheive capital growth.

View on Past Performance

The fund rose 4.39% over the month outperforming the index and the peer group. Volatility in the market remained high as the market traded between 5350 and 5600 a couple of times through August. The oil price continued to fall, however the rapid fall in sterling against the US dollar meant this was less of a beneficiary to interest rate expectations than hoped.Generally the economic data from the UK and Europe showed the slowdown was gathering pace and earnings outlooks continued to deteriorate. Defensive sectors such as Pharmaceuticals, Healthcare and Beverages performed well whilst Oil and Mining shares remained under pressure. Sterling weakness also helped companies with overseas earnings. The fund maintains a defensive tilt and so benefitted from these moves.Xstrata's bid for Lonmin, at a 40% premium, was particularly good for the fund and I have taken the opportunity to sell part of the holding and reinvest it in IFL, a producer of Ferrochrome, which has been particularly badly hit during the mining sell off. I have also sold Meggitt, whose earnings are vulnerable to the slowdown in civil aviation and reinvested the money in Bae, where robust defence spending, the strong USD, as well as new orders from Saudi mean earnings expectations are rising.

Future Expectations

I still believe that the market will find it difficult to make sustained progress until earnings estimates for 2009 have fallen further and interest rate cuts are seen across the UK and Europe. The fund therefore maintains its defensive positioning and ends the month with 52 holdings.

Fund Details