The Fund underperformed its benchmark over the period.
The largest negatives were holdings in KSK Power Ventur and Essar Energy, two energy stocks whose operational focus is on India. While energy stocks generally fared well, both companies encountered problems sourcing coal.
Smiths Group also underperformed. A fall in government bond yields has seen the funding gap in its pension fund widen. It also encountered some unexpected claims relating to possible asbestosis cases. We are looking to reduce the position.
On a more positive note, the holding in BP performed very well. A rise in the price of crude oil helped, but so did a growing belief that the company is putting the Gulf of Mexico spill behind it.
During the period, we kept our focus on companies with strong balance sheets that are geared into structural growth trends. As such, we added a new position in brewer SABMiller, which has a very strong position in fast-growing emerging markets such as India, China and Africa. In General, the Fund is overweight oil & gas, media and pharmaceuticals, and underweight banks, mining and consumer discretionary stocks.
Peter Cockburn
31 December 2011