Fund Objective

To provide investors with the opportunity for investment in an actively managed portfolio of quoted securities issued.

View on Past Performance

September witnessed a significant escalation in financial stress, symbolised by the collapse of major US financial institutions including Lehman, the largest bankruptcy in history. The downward spiral in global asset markets intensified, with the MSCI World Index falling 9.8%. Emerging Markets underperformed, falling 15.6%.In particular, China was among the worst performing markets, - 18.5%, on fears of deterioration in growth prospects as exports fell sharply. Russia (-21.9%), Brazil (-21.3%), energy and materials were also badly affected by a reversal in commodity prices, also led by concerns for global growth in 2009. The Fund fell 21.4 % over the month.There were no significant changes to the portfolio over September.

Future Expectations

Policy makers and Central Banks are at last taking extraordinary measures to limit the effects of a full blown crisis in the global financial system, and restore trust in institutions. Despite monetary easing, recession in the US, Europe and Japan seems inevitable and the long term consequences of the credit crunch will be profound.We have adopted a defensive portfolio positioning throughout this year, focusing on strong cashflows, capital efficiency and liquidity as well as avoiding balance sheet stress where we could identify it. However, there have been few refuges from the consequences of the massive deleveraging that began in September, and the violent adjustments in markets that are continuing today.Emerging economies are theoretically better positioned than in previous crises, their public finances in better shape and with generally strong current accounts and FX reserves. The transmission effects of the financial crisis will however be experienced via a protracted slowdown in the global economy, falling exports, and a continuing scarcity of credit.This will expose all structural weaknesses - countries with current account deficits, or dependence on short term inflows, and companies that are highly leveraged. New stress points may also emerge in the form of currency weakness, already evident in Brazil and Korea.We will endeavour to isolate these risks, and to identify the strongest companies that will extend their dominance through this period of stress. We will continue to maintain a relatively defensive stance during this exceptionally volatile period. We note that valuations reflect extreme levels of pessimism, on a trailing multiple of under 9 times: this is highly unusual.

Fund Details