Fund commentary

The Fund was behind the benchmark and its peers with a third quartile return over the first quarter of 2012. The factors that led to a first quartile performance in 2011 held back returns in the first three months of 2012 namely, overweight positions in tobacco, healthcare, mobile telecoms, food producers and utilities. And the large underweight to banks which rose nearly 19% was also a drag on performance.

Two out of the four sub-managers outperformed the FTSE All Share index.

• Threadneedle continued to perform well and was ahead of its peers and the benchmark. The good return was derived from continued good stock selection within industrials, a large overweight. The manager also benefited from the large underweights to the weak basic materials (zero weight in mining) and oil & gas. However, the continued zero weight to the banking sector was the main negative and partially reversed some of the positives.
• Neptune also did well with their sector positioning coupled with good stock selection helping returns. The most helpful positioning was the large overweight to life insurance and being underweight mining, oil& gas and pharmaceuticals.
• Psigma, after being our best manager last year, was the laggard in the first quarter which was no surprised as his long term view and portfolio remained the same. He remains our most defensively positioned manager. Overweight's to the defensive sectors namely utilities, pharmaceuticals and mobile telecoms hurt performance as did the large underweight to banks. However, the positives were the large underweight to basic materials and good returns from fixed line telecoms and tobacco overweights.
• BlackRock was also behind the benchmark despite its barbell approach. Two of the biggest overweight sectors actually fell in value in a "risk on" environment (mobile telecoms and pharmaceuticals) and these together with an in-line weighting to oil & gas were the main culprits for underperformance. The in-line banks proved positive to returns.

31 March 2012