Fund commentary

Sebastian Mackay

Overall, government bond yields finished the month slightly lower and prices slightly higher, although prices fluctuated in response to economic data. Corporate bonds continued to benefit from that growing appetite for risk. The spread between the yield offered by government and corporate bonds narrowed further during November.

We continued to cut the portfolio's weighting in corporate bonds following their strong rally in 2009. The duration of the portfolio was also reduced further, in anticipation of a rise in yields in coming months.

The Fund was ahead of the benchmark in December. Asset allocation was positive during the month. Security selection within our credit portfolio was also positive with holdings in names such as Leek, AIG and Annington Finance impacting performance positively.

Sebastian Mackay
31 December 2009

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