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Fund commentary

The Fund was behind the FTSE All Share index over the quarter, placing it in the third quartile of its peer group (the IMA UK All Companies Sector). The Fund was hindered by it size bias to mid caps at the expense of large caps as well as its focus on growth as generally defensive areas continued to perform well in an uncertain environment. Whilst sector positioning was marginally negative to performance, it was stock selection in the oil & gas and basic materials sectors that were the main detractors. The Fund continued to benefit from its underweight to the financials sector which was once again one of the poorer performing areas and also it’s overweight to the industrials sector. However these positives were offset by the underweight to oil & gas, the strongest performing sector over the fourth quarter.

None of our sub-managers outperformed the FTSE All Share Index, however only 20% of funds in the peer group managed to outperform the index over the review period.

Jupiter struggled as a result of both sector positioning and stock picking. Although the mandate benefited from an underweight stance to the financials, it was the mandate’s cash weighting and underweight to the oil & gas sector that held back relative returns. Positive stock picking was helpful in the industrials sector but was detrimental to performance in the consumer services and financials sectors.

Blackrock was the best performing of the four sub-managers. The manager was held back by a preference for mid and small caps at the expensive of large caps and a focus on growth companies. Sector positioning had little impact on the mandate’s relative performance. The manager gained from names selected in consumer goods and consumer services, this was offset by those stocks held in the technology and basic materials sectors.

Four Capital’s performance was affected by not owning the two large oil majors (BP and Shell) which both rose over 19%. Risk aversion over the quarter meant than stocks even with modest downgrades were severely punished which impacted the mandate’s position in names such as Cape, OPG Power Ventures and Mears Group. However, good stock selection was recorded in the banking sector and there were also strong returns from oil exploration stocks Petroceltic and Cove Energy.

Legal & General was the laggard of the four sub-managers. Although sector positioning was marginally beneficial to performance, the mandate was impacted by stock selection. Strong stock picking was recorded in the consumer services (Mecom and Compass) and technology (Telecity). However, it was stock selection in basic materials and oil & gas sectors that was detrimental to returns for example within basic materials the falling gold price caused weakness in gold mining companies Allied Gold and Centamin Egypt.

31 December 2011

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