Fund Objective

The Fund aims to provide long-term growth.

View on Past Performance

Financial markets struggled at the start of 2008, following disappointing macro numbers and continued stress in credit markets. The Federal Reserve acted aggressively in response to the crisis, taking the official interest rate down to 2.25%.The European Central Bank remains reluctant to lower interest rates, as inflation numbers continued to rise, however, it did participate in the coordinated actions of central banks to provide additional liquidity.At the start of the period, we increased the duration position of the fund as we expected a rally in government bonds, scaling back in January and increasing again during February and March. Overall, this long duration position did not add to performance as the government bonds sell-off was substantial.The weight in credit bonds was maintained, but with considerable credit spread widening, this detracted from performance. No positions were taken in non-euro government bonds or inflation linked bonds during the quarter.

Future Expectations

We feel the ECB will cut the official interest rate this year, as growth continues to slow. Most of the slowdown was caused by lower consumer spending, which deteriorated as higher inflation squeezed real income growth.Inflation numbers in the Eurozone should drop considerably as the year progresses, caused by slower demand and base effects. We are most likely to have an occasional long duration position, until the ECB rate cuts have been priced into the bond market.

Fund Details