Fund Commentary

Over the quarter, the Fund returned -13.93% versus -14.89% for the FTSE World ex UK index, outperforming the index in a dismal quarter for global equities and finishing in the third quartile. Of the nine mandates, six outperformed the Fund’s index. In terms of their own indices within the mandate, six managers outperformed, two performed in-line and one underperformed.

Three of the four global portfolios outperformed over the quarter. Walter Scott suffered the least, down 8.7%. The portfolio benefited from having no European banks and a low weighting to Europe generally. A number of specific consumer and health care names provided some positive returns in a volatile period. MFS outperformed the index based on an overweight to consumer staples and an underweight to energy and financials. The portfolio was helped by some individual names: Colgate-Palmolive, Reckitt Benckiser, and Visa. The Neptune global mandate also outperformed the index, helped by stock selection on a sector basis, especially in the consumer goods area. On the negative side, the portfolio was not helped by overweights to China and Russia, both of which had poor performance over the quarter. The Harris Associates portfolio performed in-line with the index. The top three contributors to the Fund over the quarter were MasterCard, BNP Paribas and Range Resources. On the negative side, the overweight to Europe hurt. The bottom three detractors were Adecco, Daimler and UBS.

Europe ex-UK was the worst performing region over the quarter, down 23.7%. Of the two European mandates, Cazenove outperformed the index. Owning Campari accounted for a large percentage of the Fund’s outperformance, as growth in the company has gone exponential. The portfolio also benefited from being overweight pharmaceuticals and by holding no luxury goods stocks. The JPMorgan European portfolio performed in-line with the index, suffering along with the region’s poor performance. Carlsberg was the big loser for the portfolio over the quarter due to problems with the Russian operations. Other poor performing stocks fell on the “risk off” theme: Solvay, Henkel, Modern Times Group and ING.

The Blackrock US index portfolio outperformed the S&P. This was due to the timing of the Fund’s close of day and not to any specific issues.

The First State Asian ex Japan portfolio outperformed both its own index and global markets due to its defensive nature. Over the quarter, the portfolio benefited from an underweight to direct Chinese equities. High quality names such as Singapore Telecom and Wesfarmers in Australia held up well.

Emerging markets continue to see a high degree of volatility and were unfairly punished during the quarter on the “risk off” trade. Hexam had a difficult quarter, underperforming the index. Exposure to commodities names Kazakhmys and Xstrata were hit by the negative sentiment on copper. Other detractors were Russian steel stocks Mechel and Evraz. On the positive side, the portfolio’s Turkish holdings outperformed the broader index.

30 September 2011

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