The Fund produced a -0.4% return during May compared to a target return of about 0.8%. The main positive contribution to the Fund's performance was a 0.1% return from money market investments and another 0.1% from currency strategy, which were more than offset by a -0.5% return from equity investments and a -0.1% return from bond strategy. The negative return from equities was mainly attributable to the cost of hedging market exposure and sector strategy.
The Fund's equity market exposure averaged 15% in May, with profits taken and hedges increased during the first two weeks of the month. The sell-off in global bond markets provided an opportunity to start building a long position. Bond market exposure began the month close to 0% and averaged 18% during May. The Fund continued to express a short US Treasury stance, which was offset by long positions in German, Australian and New Zealand government bonds and futures. The Fund’s risk exposure fell significantly during May as equity investments were sold, resulting in the Fund using about a quarter of its risk budget over the period.
Ken Adams
31 May 2008