Fund Objective

The Fund focuses on investing in an international portfolio of interest bearing securities including those issued or backed by the UK Government.

View on Past Performance

In an environment of increased risk aversion global government bond prices benefited once again from a flight to safety with shorter-dated bonds experiencing the biggest price movement as the markets factored in more interest rate cuts. In early December the Monetary Policy Committee cut interest rates in an effort to ease current volatility within the financial markets and on evidence of a weakening housing market. Similarly the Federal Reserve cut interest rates to bring stability to credit markets and the US economy. European government bond prices rose but lagged behind US Treasuries as the European Central Bank kept interest rates on hold. We pared back exposure to the US and UK in favour of an increased weighting in Europe as we believe much of the good news is already priced into the US and UK markets.We increased our exposure to Canada, where the US slowdown is beginning to take effect and interest rates are being cut.

Future Expectations

In line with our core strategy, we moved overweight in bonds with 5-20 year maturities to take advantage of steepening yield curves. We exited index-linked bonds in favour of conventional issues, as inflation concerns (with the exception of Europe) subsided amongst central bank policy makers. In terms of duration, until the markets enter a more settled period we will continue to trade tactically, taking advantage of market volatility.

Fund Details