Fund commentary

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 performed strongly during the quarter helped by a credit market which experienced some of the strongest excess returns on record in January and February. This strong performance was driven by the high beta area of banks and insurance bonds and helped by a decent contribution from cyclical non-financial groups too. Towards the end of the quarter we reduced the risk in the Fund helping to protect it from some of the pull back see as we entered April.

Fund Positioning
We embarked on a strategy of derisking the portfolio and locking in profits. This involved reducing the proportion of banking sector bonds and switching into more highly-rated bank bonds. We participated in a number of new issues including National Australia Bank, ABN Amro, Luxottica and Glencore.