Market Review
Corporate bonds outperformed government bonds. A rally in risk assets was driven by a variety of positive factors. The most important catalysts were the European Central Bank's two long-term refinancing operations. These boosted confidence and put a floor under the prices of corporate bonds issued by the financial sector.
Fund Performance
The Fund was ahead of its peer group average during the quarter. The largest contribution to outperformance came from security selection where our exposure to securities such as RBS and German government bond contributed to performance. The Fund also gained due to our derivatives position during the quarter.
Fund Positioning
Although the LTROs have stabilised the market, the environment remains precarious, and we adopted a strategy of reducing subordinated debt holdings in peripheral Europe. We participated in a number of new issues including ABN Amro and Everything Everywhere. At the end of March, the Fund was overweight in banks and insurers.
Daniel McKernan
31 March 2012