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Ashburton Dollar Asset Management Fund Ashburton (Jersey) Limited Ashburton Dollar Asset Management Fund News Fund Name Changed Tuesday, 25 October 2016 Official Announcement The Ashburton Replica Dollar Asset Management Fund will change it's name to Ashburton Dollar Asset Management Fund, effective from 25 October 2015   Ashburton Replica Asset Man USD comment - Dec 12 Wednesday, 3 April 2013 Fund Manager Comment Review Global equities ended the year with a positive month to register strong returns for 2012. The MSCI World Index closed the year up 15.9% in total return terms (local currency). Protracted US 'fiscal cliff' negotiations, which risked a sharp fiscal tightening in the region of 4-5% of GDP, were a lingering concern, although most market participants believed some agreement would be reached at the last minute. A compromise deal was ultimately approved by Congress early in the New Year, avoiding marginal income tax rate hikes on incomes below $400k, although payroll tax rates go up by 2%. A decision on spending cuts was deferred for two months. US equities underperformed on the month as a result, while Japan and China were notably strong performers. Japan rallied 10% in local currency terms on the election of Prime Minister Abe and the expectation of looser monetary policy, while the MSCI China index rose 4.8% and the Shanghai Composite 14.6% as sentiment towards the Chinese economy rebounded. The Yen dropped nearly 5% against the US dollar in anticipation of BoJ stimulus. Recent laggards, the SA Rand and Brazilian real strengthened over 5% and 4% respectively. Global government bonds were little changed (Europe outperforming the US and Japan) and the Citigroup World Bond Index closed the year up 4.5% in local currency terms. At its December meeting, the Federal Reserve agreed to purchase further US Treasuries at a pace of $45bn per month as the 'Operation Twist' program expired, in addition to $40bn per month of mortgage-backed securities. Activity There was very little change to strategy during the month. US Treasuries were purchased during the month for liquidity purposes. Outlook Moderate economic growth is expected in 2013. Fiscal tightening is likely to weigh on US growth in the first half of 2013, although we believe underlying domestic growth momentum is sufficient to prevent a slide into recession. China is expected to accelerate modestly, while Europe is expected to emerge slowly from recession, although the area of weakest growth. We expect low returns from cash and developed market government bonds. Corporate bonds should outperform government bonds modestly. Equities are expected to rise further in 2013, although perhaps not the extent of last year. Valuations have re-rated somewhat on a year ago as risk premia and implied volatility have fallen in many assets. Our current positioning within equities sees us overweight Europe and Emerging Asia, neutral Japan and underweight the US. Risks include a further escalation in the European debt crisis, a rise in geopolitical tensions and the US debt ceiling negotiations in Q1, among others.   Ashburton Replica Asset Man USD comment - Sep 12 Wednesday, 14 November 2012 Fund Manager Comment Review Global equity markets in September continued to be dominated by central bank and policy action. Weak market data out of China where manufacturing surveys remain in contraction territory held the market back initially early in the month. But the ECB's announcement of Outright Monetary Transactions (OMT) as a new unconventional monetary policy tool eventually prolonged the summer rally which saw the MSCI world equity index gain just under 2% (in local currency terms) during September. Credit also enjoyed the risk on rally as spreads tightened further in both investment grade and high yield bonds. Our Multi Asset Funds all posted positive returns over the month with minimal volatility. The government bond markets had a poor start during the first half of the month, with US treasuries selling off on the back of the Federal Reserve's QE3 decision on 13 September, which is to be focused on buying mortgage-backed securities. The "unlimited" nature of the Fed's stated intention to purchase newly issued mortgage based securities as long as it would take for unemployment to improve surprised the market on the upside. Bonds rallied after this initial setback, with the Citigroup global government bond index rising a modest 0.33% over the month. The QE3 announcement caused further weakness in the US dollar with the New Zealand dollar and Euro being the top two performers in the G10 space, whilst the Indian Rupee was the emerging market winner rising over 5.5% Activity We modestly increased our weighting to Indian equities and corporate debt throughout the month. On the currency front we increased our exposure to the US dollar for both our sterling and euro based services as we feel the recent weakness in the USD looks to have stalled. In our Cautious/Balanced/Aggressive Funds, following a strong rally in gold we reduced our exposure as we feel that a better buying opportunity may present itself in the coming weeks. Outlook We expect a difficult global economic backdrop to persist. The issue of the fiscal cliff will hang over the US economy, creating uncertainty for a few months more; while we expect Europe to emerge from recession only very gradually. We are encouraged by recent announcements from the ECB, but much remains in the hand of politicians to deliver on fiscal measures. The market expects a Spanish bailout request to occur shortly. On a more positive note, in our view, cyclical concerns over Chinese growth are likely to ease somewhat over the coming months, along with brighter prospects in other emerging markets. We expect the global economy to register modestly higher growth in 2013 than in 2012. In this context, financial markets are likely to remain volatile and subject to political influence and shifts in sentiment. Over the medium term, we continue to see the best prospects in equities, corporate bonds and select emerging market bonds and currencies. However, markets don't move in a straight line and the coming months will likely throw up plenty of news, noise and opportunity for tactical asset allocation. In the meantime, we emphasise diversification and capital preservation in all of our Multi Asset Funds in the pursuit of steady, positive growth over time.   Ashburton Replica Asset Man USD comment - Jun 12 Thursday, 16 August 2012 Fund Manager Comment Review June provided some relief for investors holding risky assets after the turmoil witnessed during May. The MSCI world equity index rose over 4% (in local currency terms) whilst the bond markets fell a modest -0.4% helping our Multi Asset Fund range to post positive gains for the month. The Greek elections were held during June with the new Democracy party 'winning' by a narrow margin. We now await the outcome of coalition talks, a process not met successfully only a few months back. At the European Summit at the end of June, measures were announced that have given markets some early cheer (in particular, moves towards a banking union and the direct recapitalisation of banks as well as possible bond market intervention under easier terms). Under the recapitalisation scheme, Spain received agreed funding for its banks, however, Fitch downgraded Spain three notches to BBB, estimating the cost of restructuring the banks to be as much as €100bn. Elsewhere, the Royal Bank of Australia (RBA) cut interest rates by 25bps to 3.5pct whilst China cut rates for the first time since 2008 by 0.25bps. On the foreign exchange front, the New Zealand dollar was the best performing G10 currency, rising over 4% during the month on the back of better than expected Q1 GDP data. Activity Trading was very light with regards to changes in strategy during June; we reduced our European equity exposure and switched the proceeds into Japanese equities on the basis that these are trading at attractive valuation levels, particularly from a relative perspective. Outlook While the first few months of the year have produced some wild swings in markets, little has been resolved in terms of the major issues worrying investors as we entered the year. The European sovereign debt and banking crisis remains far from over; concerns over the Chinese growth outlook have grown rather than receded and the sustainability of US growth remains under question following recent data disappointments and the looming fiscal cliff at the end of the year. There is nothing to suggest that the crisis in Europe will end anytime soon, something we have argued consistently. For a resolution to this crisis that does not end with a break-up of the euro-area, it is likely to require debt monetisation or mutualisation. In the meantime, the muddle-through cycle of panic followed by short-term policy response continues until the next flare-up. We therefore expect market conditions to remain challenging. Equities are priced attractively relatively to bonds and cash and are likely to deliver superior returns over the medium-term. But in an environment of worsening macro momentum which is subject to considerable risks - including geopolitics - equities also face downside risks in the short-term. Within fixed income markets, we view yields in the perceived 'safe-haven' government bond markets (US, Germany, Japan and UK) as unattractive even if we expect overnight interest rates to remain extremely low for some time. We do, however, see better value in corporate bonds and select emerging markets where bond markets are benefiting from declining inflation. In terms of currency markets, we currently have a preference for the US dollar over the British pound or euro; while we also think several emerging market currencies are attractive such as the Mexican peso, Malaysian ringgit and Korean won.   Ashburton Replica Asset Man USD comment - Mar 12 Friday, 29 June 2012 Fund Manager Comment Review Global equity markets continued their strong run to close the quarter up 11.1% in local currency terms (total return), following a gain of 1.3% in March. On the month, US and Japanese equities led the way with total returns of 3.3 and 3.2% respectively. US bank stocks were boosted by stress test results released in early March, suggesting resilience to another financial shock. European equities were roughly flat on the month, while China was a notable laggard (-6.8%). Having rallied in January and February, Chinese stocks were subject to renewed concerns of a hard landing in the domestic economy as industrial profits data was released, showing a decline of 5% year-on-year in the first months of the year. This followed previous mixed economic releases and Premier Wen's downward revision of the 2012 growth target to 7.5%, which had already unsettled markets (although not unsurprising or significant in itself, in our view). Economic data released so far this year is consistent with a slowdown towards a soft landing (say around 8%) in our view, but until the data definitively turns upwards, investors will likely remain nervous. Global government bonds sold off modestly (-0.4% in hedged US dollar terms). US treasuries were notably weak (-1.1%) as the Federal Reserve March meeting statement dampened expectations for a third round of QE. Corporate bonds and emerging market bonds outperformed modestly. In terms of currency markets, sterling outperformed (+0.6%), the Brazilian real weakened following intervention (-6%), the yen dropped a further 2.1% and the Australian dollar and Indian rupee were both down 3.6% on the month (all versus US dollar). Gold declined 2.5%. After a strong first two months of the year, March was a disappointing month for our Multi Asset Funds. An overweight position in HK/Chinese equities was a drag on performance after previously boosting returns; as was weakness in the Brazilian real and the decline in market volatility which dragged down the value of volatility futures we held as an insurance policy in case of an unforeseen correction. A frustrating month but overall a satisfactory quarter, in our view. Activity Equity weightings were maintained at the same levels throughout the first quarter (small overweight relative to neutral) until the end of March when we reduced exposure by 5% across the Multi Asset Funds. While little has changed in terms of our medium-term views, the recent fears in China, at a time when investors have become much more complacent of risk, suggest volatility may increase in the near-term, hence our modest reduction in risk. Towards the end of the month we added modestly to emerging market currency exposure, in particular the Malaysian ringgit, Korean won and Mexican peso. Over time, we believe a select basket of EM currencies will outperform the majors. Outlook Looking ahead, we are encouraged by recent developments in the US economy and believe steady growth in the range of 2% - 2.5% is likely this year. Risks are more elevated in China and Europe, in our view, but we believe the recent fears over Chinese growth will subside over the coming 6 months or so, if not sooner. This would likely create a strong rally in China exposed equities, but conditions are likely to remain difficult and volatile until economic data confirms a turn in the cycle. We will try to manage the risk/reward trade-off of this view over the coming months, having also to be aware of the risk that our base case scenario may be proven wrong or come to fruition later than we expect. In Europe, we continue to see difficult times ahead as austerity bites at a time of very low growth. In the near-term, elections in France and Greece may be a source of volatility. Generally, we view equities as attractively priced and also retain a preference for corporate and emerging market bonds within fixed income markets. We also think a number of emerging market currencies should strengthen against the majors (including interest rate return). However, risks remain and we are currently positioned somewhat cautiously, since sentiment in the wider investment community has become much more bullish already following strong gains in markets, in contrast to the opportunities presented by widespread pessimism late last year.   Ashburton Replica Asset Man USD comment - Dec 11 Monday, 19 March 2012 Fund Manager Comment Review Global markets rallied into early December in anticipation of another summit of European leaders scheduled for December 9th. However, the MSCI World Index was unable to break out of its trading range, posting a small gain of 0.5%, which made little impact on the overall 7.5% decline seen during 2011. Given the ongoing concerns in the Euro zone, December provided some solace for bonds after two consecutive losing months seen in October and November. The global government bond index posted a 1.7% gain in December and finished 2011 up 5.7% (both in local currency terms). December started with coordinated central bank intervention to ease the US$ liquidity crunch for European banks. The EU Summit amounted to an accord with tighter budget controls, which was agreed by the 17 members. However, not all 27 nations have agreed to the accord and in particular the UK signalled an emphatic 'no'. Several Institutions, including Schroders are making contingency plans for a Euro zone break up. The month ended very much as it begun with concerns on funding levels for many of the Euro zone members. Italy's final auction of the year went with a whimper and complaints from their authorities that the EU is not doing enough to provide liquidity to nations being penalised with high borrowing costs. Further geopolitical worries towards the end of the month on the back of leadership change in North Korea and threats from Iran to close the Strait of Hormuz (which sent Brent back above $110/bbl) remained in the background as US policymakers decided to extend tax credits just before the year-end for at least another two months and China reported better manufacturing data over New Year. Activity Apart from placing more of our overnight cash weighting into German and UK Treasury Bills no other strategy changes were made during December. Outlook A rather cautious global outlook for 2012 from market commentators seems supported by a number of (geo) political tail risk factors, including the continued risk of an unmanaged default in the Euro zone, several political elections in Asia, Europe and the US and the potential for unrest in the Middle East. Nevertheless, some of this in our view is already reflected by entrenched overweight positions held by market participants outside of equities and in defensively perceived equity markets (such as the US), which in turn trade on premium relative valuations. Against this backdrop, maintaining the flexibility to take advantage of tactical opportunities and manage risks will be paramount, in our view. While we do not expect 2012 to be easy, our aim will be to manage portfolios to take advantage of both short and longer-term opportunities, while protecting as best we can against downside risk. With time we are confident that this approach will deliver the steady positive returns over the cycle, as has been the case for nearly three decades in our Asset Management portfolios and funds.   Ashburton Replica Asset Man USD comment - Sep 11 Thursday, 29 December 2011 Fund Manager Comment Review Markets were subject to something of a 'perfect storm' in September: ongoing fears relating to the European debt crisis; worries over an impending recession in the US and Europe and a hard landing in China. Economists revised down growth forecasts sharply in developed markets. Against this gloomy backdrop, fears have risen that policymakers are out of bullets with which to fight any further slowdown. The consensus view is that EU policy is confused, the ECB reluctant to buy bonds aggressively, US politicians divided and the Chinese still more worried about inflation than growth. As a result of these fears, risky assets fell sharply in September. The MSCI World index lost over 6% in local currency terms; US high yield bonds dropped 3% and the JP Morgan Emerging Markets Bond Index dropped 4%. By contrast, global government bonds rallied, with the Citigroup Global Bond Index up 1.1% in local currency terms. Within equities, China, HK and Russia were notable underperformers. As risk aversion increased, the US dollar rallied across the board. Emerging market currencies were hit especially hard with the Brazilian real (-15%), South African Rand (-14%) and Mexican Peso (-11%) among the sharpest fallers against the dollar. Sterling (-4%) was a relative outperformer. In terms of major policy initiatives, the US Federal Reserve announced the intended purchase of $400bn of long-dated Treasuries funded by the sale of short-dated Treasuries in a policy dubbed 'Operation Twist'. The Swiss National Bank intervened aggressively to devalue the Swiss franc against the Euro on concerns that it had become grossly overvalued. Activity Activity was light in September. For Euro-based Funds we increased US dollar exposure from 5% to 8% since we had been surprised by the Euro's resilience given deteriorating news flow. We added to UK inflation-linked gilts on weakness early in the month, where we still believe 'real' yields offer value given the outlook for UK inflation. We also increased exposure to Mexican local currency debt (via the 10-year benchmark issue). Following the recent sell-off we view the currency as attractive, while recent benign inflation readings suggest potential for curve flattening to occur over time. Equity exposure was increased on weakness in the Aggressive Fund, but otherwise was maintained at existing levels. Outlook The investment backdrop remains challenging. Volatility is high and the fears that have dogged markets for some months now are unlikely to disappear in a flash. We believe the European debt crisis remains the greatest concern and while we do not believe a 'silver bullet' solution exists, we do hope for a more constructive stance from European policymakers. Relative to the consensus view, we are more sanguine about US growth prospects and have been mildly encouraged by recent data. Developments in the Chinese financial system remain opaque but we do not foresee a hard landing for China and view the authorities there as having sufficient policy tools to tackle any problem loan issues and ease liquidity. While a number of uncertainties continue to weigh on markets in the near-term, the recent sell-off in risk assets is likely to bring a number of opportunities to medium-term investors (2-5 year view), provided significant policy mistakes are avoided. Equities are trading on valuations towards the low-end of their range of the past 25 years; high yield US corporate debt offers a yield around 9% with low expected default rates and the panicky sell-off in a number of emerging markets is likely to present opportunities. Sentiment indicators suggest widespread pessimism, which from a contrarian point of view allows scope for positive surprise. Managing short-term volatility and the risk of policy mistakes, while at the same trying to take advantage of cheap valuations (and high expected returns) in a number of asset classes, remains the challenge. Our focus continues to be on generating attractive returns over the cycle with below-average volatility, achieved by means of a flexible and diversified investment approach.   Ashburton Replica Asset Man USD comment - Jun 11 Monday, 12 September 2011 Fund Manager Comment Review Global equities struggled on the month (-1.7%) on a variety of concerns: the European sovereign debt crisis, fears of a China hard landing, slowing US growth and worries about the US budget deficit and imminent debt ceiling decision. Government bonds provided little offset, giving up gains late in the month for an overall decline of 0.1%. Corporate bonds underperformed on the month as spreads widened, although in US dollar terms, emerging market bonds outperformed. Perceived safe haven currencies such as the Swiss franc and Japanese yen outperformed; sterling declined 2.4% against the US dollar. Activity With equities having experienced a significant correction of 7% at a global level, we closed out protective put options and raised equity exposure via index futures in mid-June. The decision was based on a view that pessimism had risen to elevated levels, cyclical growth concerns were likely to ease in H2 and another Greek bailout would provide relief. Equities did indeed rally through to the end of the month. However, a worsening sovereign debt situation in Europe, as contagion spread to Italy, prompted us to reduce equity exposure again in July as a means of reducing risk. There were no other major changes to our Multi Asset Funds. Outlook For the time being some caution is merited. We had been more positive in June when we raised equity weightings in our Multi Asset Funds in the belief that investors were too pessimistic on a number of issues. However, the recent sovereign debt contagion to Italy is a material concern and a potential game-changer. We have therefore scaled back risk exposures in our Funds and await signs of stabilisation before putting more capital at risk. Our baseline view remains that global growth will recover somewhat in the second half of 2011 (reduced oil price effect, Japanese recovery, US capital spending incentives, strong corporate profits and balance sheets) and that China will achieve a soft-landing rather than a sharper downturn. There are of courses risks to this view, but equity markets reflect this and are not expensive on a forward PE ratio of less than 12x. Europe's sovereign debt crisis drags on with no long-lasting solution in place. We have viewed a crisis contained to Greece, Ireland and Portugal as manageable. So far, this has been the case with a series of short-term policy fixes generating an unhealthy, but so far bearable, 'muddle-through' scenario. But this represents something of an unstable equilibrium. Should contagion spread persistently to Spain or Italy then market conditions could deteriorate further, requiring a more aggressive policy response from the authorities. Equity market valuations and corporate profitability create scope for decent future returns, provided large tail-risks do not materialise. The outlook is uncertain and reliant on effective policy decisions, which makes for a challenging investment environment. A flexible approach is required under current conditions.   Ashburton Replica Asset Man USD comment - Mar 11 Tuesday, 24 May 2011 Fund Manager Comment Review The major shock during March was the devastating earthquake and tsunami to hit Japan. Following the tragic event, fears quickly grew over the risk of a nuclear disaster at the Fukushima reactor plant. At the time of writing, the worst fears have dissipated somewhat although there remains uncertainty. Elsewhere, in the Middle East and North Africa concerns rumbled on as NATO forces became involved in instigating a no-fly zone in Libya; while Saudi troops entered Bahrain to quell demonstrations, an act which risks heightening tensions in the region. After a brief move down, the oil price rallied back towards very elevated levels. World equities ended the month down 1.5% (local currency terms). Unsurprisingly given the news, Japan was the major underperformer (-8.6%), although European equities were also weak (-3.4%). Emerging markets typically rebounded from recent weakness with India, Korea, China, Turkey and Russia posting strong returns. Bonds were volatile intra-month, although posted modestly negative returns overall. In currency markets, the yen, US dollar and sterling weakened versus most currencies with the euro and a number of emerging market currencies particularly strong. The euro benefited from an increasingly hawkish tone from the ECB, with a rate hike in April seemingly on the cards. Our Multi Asset Funds posted positive returns on the month, benefiting from closing out equity hedged positions on weakness, positive stock selection and the flattening of the US and UK yield curves. Activity Equity markets globally reacted very negatively to the Japanese earthquake. However, while a terrible human tragedy, we felt that markets had overestimated the economic impact. Accordingly, we closed out some short equity futures positions in Europe and the US that we had implemented last month to hedge the risk of a market correction. As markets rallied towards the end of the month we benefited from an increased equity weighting. We also added Indian rupee exposure across the funds in March, given its attractive carry and recent underperformance on emerging market concerns. Outlook Our strategic asset allocation views have not changed materially over the course of the past quarter. A number of high profile events have grabbed the headlines - events in Egypt, Libya and Japan for example - while behind the scenes fundamentals continue to improve for the corporate sector globally. The tragedy in Japan will depress growth in the short-term but prompt a reconstruction boom a few months down the road. While there may be some disruption to supply chains in certain industries we do not believe the earthquake will have a prolonged impact on the global economy. Events in North Africa and the Middle East have pushed the oil price higher. Should oil rally further this could pose a material risk to global markets, but at current levels we believe the impact is manageable. We remain positive towards equities on a medium-term view supported by attractive valuations and strong earnings growth. We do not expect strong returns from bond markets at the generic index level, although we see pockets of opportunity in various markets: longer-dated US and UK exposure, corporate credit and selected emerging markets. We continue to believe that emerging Asian currencies will outperform the majors on a medium-term horizon. As we enter the second quarter, a gradual tightening of monetary in developed markets (not just emerging markets) will become a focus. At such low levels of interest rates we do not believe this will pose a major headwind for global equity markets, although temporary volatility may result, potentially providing buying opportunities for medium-term investors.   Ashburton Replica Asset Man USD comment - Sep 10 Wednesday, 27 October 2010 Fund Manager Comment Review Markets embraced risk assets in September following the US Federal Reserve's strong intimation on further quantitative easing. Global equities were the main beneficiary and enjoyed a good month closing up 6.8% (in local currency terms). Corporate and emerging market bonds also performed well as spreads tightened moderately, but more broadly bond markets corrected somewhat after a stellar performance in August, and the Citigroup global bond index finished down 0.4% on the month (local currency terms). US data was no more than hit and miss this month. Durable goods orders (ex. Transportation) were much better than expected, but headline consumer confidence fell, and coupled with a stubbornly high unemployment rate, this spells danger for final demand. Ironically however, this environment is likely to prompt further Fed quantitative easing sooner rather than later and this is great news for equity markets. UK gilts and German bonds performed poorly over the month as did US treasuries, albeit by a lesser degree. As a result, 10- year yields, which plummeted to new lows during August, reversed after investors switched from the safe haven of bonds into equities and commodities. In the currency markets the US dollar was the worst performing G-10 currency during August, on speculation that further quantitative easing by the Federal Reserve will reduce the purchasing power of the Greenback. The Swedish krona and Australian dollar were the top two performing major currencies (up 9.5% and 9.0% respectively versus the US dollar), whilst the perceived defensive currencies such as the Swiss franc and the yen underperformed. Strong performances were also seen by the major Asian currencies such as the Korean won and Taiwanese dollar. Activity We marginally raised our equity exposure in September, and are now near to our maximum limits in this asset class. We have maintained a significant exposure to Asia ex. Japan and we believe China is near to the end of its tightening phase. The next government five year plans will be announced shortly and this should give us more perspective on the mood of policy makers in terms of the country's growth trajectory. We have maintained a bias towards international companies with Asian exposure, and this has been reflected in the overweight to the industrials sector that we have had all year. This month we closed our underweight in the materials sector as we saw demand for raw materials, including agro-chemicals starting to pick up again. In Europe we added Yara and K&S (agricultural fertilizers), and aluminium supplier Norsk Hydro with 10% of its revenues generated in Asia. We closed out our short dated Canadian government bond holdings at a decent profit after benefiting from the fall in 2-year Canadian yields since April this year. Exposure to a variety of corporate bonds was also increased during the month. Currency strategy was unchanged during September. We continued to hold our long position in a basket of Asian currencies (Korean won, Taiwanese dollar and Indian rupee) for the dollar fund, and for the Euro fund where we also maintained a 5% position in the Swedish krona. The sterling-based Funds are largely hedged back to base currency. Outlook We have seen a powerful run up in equities over the last few weeks, as sentiment has turned positive again. Whilst this move is consistent with our own positive view on equities, there are still uncertainties short term that could weigh on investors' minds. Markets have quickly moved to price in QE and any hesitation by the Fed would be taken badly. There is still the risk that government intervention, perhaps by additional fiscal tightening, or protectionism, or pressure on monetary policy, could rattle investors. We cannot rule out the possibility of further disruption in the peripheral European economies and their banks. These are all concerns that are likely to play their part in keeping volatility in equity markets relatively high in the shorter term. However longer term we would stress just how supportive the environment should be for equities. Interest rates are likely to stay low for an extended period, and the Fed is committed to raising asset prices in order to shore up confidence and put a floor under property prices. US companies in aggregate are cash rich, and low interest rates mean they can borrow for capital spending, or buy growth through mergers and acquisitions (M&A), or return cash to investors by raising dividends or buying back shares. All this is positive for equity investors, particularly considering the meagre returns on offer for holding bonds and cash by comparison. Whilst we do not think there is a bubble in bonds, still we believe US Treasuries (especially short-to-mid maturities) offer poor value currently. The expectation of prolonged low short rates may prove correct, but in the event will provide little return - an unattractive expected return profile. We continue to favour Treasury inflation protected securities (TIPS) to offer attractive diversification as a good each-way-bet against both inflation and deflation (to the extent that principal is redeemed at par in the event of accumulated deflation). At current yields we do not expect high future returns from fixed income markets in general, but will continue to seek opportunities to generate a steady, positive return for the funds overall with limited risk.   Ashburton Replica Asset Man USD comment - Jun 10 Tuesday, 7 September 2010 Fund Manager Comment Review Financial markets remained highly volatile in June. Equities closed down 3.6% on the month, despite a rally of over 7% intramonth; this summer has thus far been an uncomfortable time to be an equity investor, and it seems 'double dip recession' is the phrase on every commentators lips. By contrast, government bonds in the largest economies benefited from a flight to safety and the prospect of ongoing low interest rates, and the Citigroup global government bond index rallied 0.74% (local currency) on the month. Across the major currency markets, the yen and Swiss franc both strengthened, benefiting from safe haven status, while the euro remained weak and the dollar fell with equity markets on fears of a slowing economy. Latterly the mood has not been lifted by some less positive economic data out of the US, in particular a much weaker than expected consumer confidence reading on 29 June which triggered an equity sell off of more than 3% on the day. June's ISM manufacturing data also disappointed, raising concerns that growth in the second half of the year might be more muted. Further a field estimates of the rate of Chinese growth in the first half of this year were also revised lower (though still very much positive), and this news was taken badly. By contrast, Germany continues to surprise to the upside, benefiting from a weaker euro, and the latest industrial production, factory orders and PMI manufacturing data all showed an improving outlook for Europe's biggest economy. News of fiscal tightening across a range of Western economies has also grabbed the headlines this month, as governments begin to wrestle with ballooning deficits, and has raised concerns that such measures might choke of the nascent economic recovery. Activity There was very little activity in the Funds in June. We believe that equities will perform well in the medium term, and we have maintained our pro-cyclical stance, preferring the industrials and consumer cyclical sectors, whilst remaining underweight financials where there is still much uncertainty. Our recent decision to increase our equity weighting to Europe and Korea was rewarded in June on a relative basis, particularly so for the Korean ETF which outperformed the MSCI world by over 5% on the month. Since concerns of a double-dip recession are already reflected in prices, we see little value in most government bonds hence the continued low duration of the Funds. For dollar and euro investors we added some exposure to the Swedish krona during June; this currency has been weak of late despite strong economic data, and we believe it now offers good value. Sterlingbased Funds continue to be almost entirely hedged back to base currency, which has proved to be advantageous in recent weeks on the back of a stronger pound. Outlook Investor sentiment has become extremely pessimistic on the outlook for the global economy and risky assets in recent weeks. In our view, this is likely to be an overreaction - double-dip recessions are very rare, and recent data (while disappointing) as yet suggest nothing more than a modest slowdown. That said, the world's developed economies suffer from some severe structural fragilities which pose a risk to the sustainability of recovery. Moreover, the recent trend towards fiscal austerity limits the options for policymakers to re-stimulate growth should a relapse occur. But in our view, a double dip recession remains a possibility not a probability. Accordingly, we continue to favour a higher weighting in equities, and believe safe haven assets such as US treasuries or German bunds offer little value, and will only provide adequate returns if a double-dip becomes a reality. As such we are maintained a low duration in the Funds. Corporate bonds now offer more attractive potential returns and we maintain exposure to this area. Currency exposures are low currently given the extreme moves in markets, although we believe trading opportunities will present themselves. The current volatile backdrop is likely to provide a number of investment opportunities in the coming months, and maintaining a nimble and opportunistic approach will be the key to generating decent returns.   Ashburton Replica Asset Man USD comment - Mar 10 Tuesday, 11 May 2010 Fund Manager Comment Review The concerns that had lately weighed on markets gently ebbed away in March as optimism for global growth returned. Global equities enjoyed a very strong month, rising over 6% led by Japan. Emerging market and high-yield corporate bonds also performed strongly, with investment grade corporate bonds outperforming modestly. Strong US economic data and concerns over the amount of required debt issuance sent US treasury yields higher and prices lower. Global government bonds delivered zero return on the month. Emerging market currencies exhibited broad strength on the month, while among developed markets the Canadian and Australian dollars were strong and the Japanese yen notably weak. Our Multi Asset Funds enjoyed a good month. Relatively high equity weightings; a regional overweight position in Japanese equities; exposure to emerging Asian currencies and conservative positioning with regard to US interest rate risk supported returns on the month. Activity Turnover in our Multi Asset Funds was low in March. Equity weightings were maintained at relatively high levels given the constraints in place for each Fund. Regionally, we continue to emphasise diversification across both developed and emerging market equities although an overweight position in Japan has boosted returns in our funds in the first quarter. Positions in UK 10-year gilts and 30-year German bunds were closed after periods of strength. We added modestly to emerging market and investment grade bonds late in the month. Following a significant increase in US bond yields in March we anticipate adding some duration risk in the coming weeks. Currency strategy for the US$ Funds was little changed on the month as the Funds continue to hold positions in the Indian rupee and Korean won. Following a period of material weakness in the pound, currency exposure in the Sterling Funds was returned almost entirely to base as positions in the Indian rupee, Korean won and Australian dollar were closed out. For the Euro-denominated Funds a broad exposure outside of base (around 25%) was maintained in the belief that the euro will remain a relatively weak currency, confronted by problems in Greece, a lagging interest rate cycle and a relatively expensive valuation. Outlook We continue to believe that the global economy is entering a sustainable recovery and is likely to prove more resilient than most observers anticipate. We expect the incoming data to support this view during the second quarter. An improving economic backdrop is supportive of growth in corporate profits and we believe this should be a positive driver for both equities and corporate bonds. Valuations for equities and sub-investment grade bonds remain attractive, while more highly-rated corporate bonds offer modest upside. Given the steepness of the US curve and following recent weakness, we believe longer-dated US Treasuries are starting to look interesting. Similarly, implied real yields on long-dated inflation-protected Treasuries above 2% are decent value. The material widening of bond yield differentials between the US and core Euro-zone markets means we no longer view European government bonds as obviously more attractive than US treasuries. A strong US economy should also underpin the US dollar versus other developed country currencies and of the four "majors" we continue to believe that the US dollar and sterling will appreciate on a trend basis against both the euro and the yen. On balance we believe several emerging market currencies should also perform well, especially those in Asia. While our macro view suggests a benign backdrop for risky assets we do, however, expect continued bumps along the road. Clearly, a number of risks remain; most obviously those in the hands of policy-makers - monetary and fiscal policy, regulation and geopolitics are among the most important. Concerns over Greece, monetary tightening in China and the US, commercial real estate losses or increased banking regulation could all resurface at any time. So too could a number of shocks that are unforeseeable.   Ashburton Replica Asset Man USD comment - Sep 09 Wednesday, 9 December 2009 Fund Manager Comment Review September provided the fourth consecutive month of strong government bond market returns with the Citigroup Global Bond Index up 0.5% in local currency terms. Despite fears over historic market weakness in September, riskier asset classes also continued to perform well with global equities up 2.9% in local currency terms, and the iBoxx US dollar corporate bond index up 2.1%. Emerging market bonds performed strongly, with the JP Morgan Global EMBI Diversified Index up 4.9% on the month in US dollar terms. On a regional basis, Japanese equities were the major underperformer (-5.8%) in part hurt by the strong yen. Asia ex- Japan was up 6.4% in local currency terms after a weak August. The strong performance of both government bonds and equities concurrently since July has generated much debate among market participants. A combination of factors appears to be driving this recent trend: (i) bonds were very oversold and arguably undervalued in June and have therefore managed to perform despite an improving growth backdrop, (ii) yield curves are extremely steep and an expectation of sustained low cash rates is pulling down the required yield on longer maturity bonds, (iii) stronger economic growth reduces the tail risk that governments need to implement even more drastic stimulus measures and (iv) inflation pressures are muted in the near-term. Arguments focused on 'abundant liquidity' and the effects of quantitative easing are effectively the same as explanation (ii) above. The dollar and British pound were the clear losers over the month with commodity currencies, emerging markets and the Japanese yen the standout performers. Much of the recent weakness in these two currencies can be attributed to dovish central bank commentaries and an expectation of continued loose monetary policies. Activity There was very little activity in the Fund in September. Equities were maintained at the levels of late August following tactical risk-reduction measures. There was a modest increase to the bonds weighting through Australian bond futures in the Asset Management Funds. There were no changes to currency weightings in our Sterling and US dollar denominated Funds, which remain largely in base currency with some Asian exposure. For our Euro denominated Funds we increased exposure to Asian currencies (through the Indian rupee and Korean won), the Norwegian krone and also to Sterling. Outlook Valuations for risk assets have now normalised from distressed levels early in the year. However, central bank policies remain extremely favourable to asset prices in general. This partly explains the strong performance of equities and bond of late. While we concur with the consensus view that long-term structural problems exist in the West - for example, high public debt levels and the likelihood of weak prospective credit growth - we believe on a 6-12 month basis there is a risk of positive economic surprises relative to expectations. Leading indicators are pointing to vigorous growth over the coming months, not least in China but also in the West. The backdrop is therefore positive for equities, commodities and emerging market assets. While we have reduced equities on a tactical basis, once we believe risks of a further correction have diminished we will look to increase once again since we believe equities are the asset class of choice over the next 12 months. Government bonds are being supported by quantitative easing and loose monetary policies but we believe bonds are overbought short-term. We continue to favour European and Australian bonds over US bonds. In terms of currencies, there is significant pessimism towards both the US dollar and Sterling currently, which suggests a bounce may not be far away. Structurally we believe Asian, emerging market and commodity currencies will be re-rated versus the currency majors and these areas will increasingly be the focus of currency strategy. We believe the Euro is overvalued on a fundamental basis and we have taken material exposure to a basket of currencies for Euro-denominated Funds.   Ashburton Replica Asset Man USD comment - Jun 09 Tuesday, 15 September 2009 Fund Manager Comment Review On the quarter, world equities delivered very strong returns ( 19.7%), but were down modestly in June (-0.6%). Commodities continued their recent trend of appreciation, with the oil price up over 5% in June, taking the quarter's gain to 40.7%. In tune with strong equity market performance, corporate bonds also rose strongly, up over 8% in the eurozone and over 9% in the US. Global government bonds were weak performers in the second quarter, falling -0.8% in hedged US dollar terms. Eurozone government bonds outperformed, rising 0.6% in local currency terms. US treasuries were particularly weak, falling - 3.1% on the quarter. Several issues contributed to weak government bond market performance in the quarter: improving economic conditions, fears over government debt issuance, concerns over long-term inflation and the potential for overseas central banks to diversify away from US treasuries were important themes. The primary trend in currency markets over the second quarter was dollar weakness, with commodity and 'riskier' currencies (e.g. Australasian currencies and sterling) strong performers. Broadly speaking, economic data continued to show an abatement of the global recession although the current economic backdrop remains weak and recovery fragile. Relative to US and UK data releases, European data in June was disappointing. Chinese data continues to point to a recovery in growth, although market sentiment reflects widespread uncertainty of how sustainable government-led growth will be. Activity We took some equity risk off the table during the middle of the month, for a week, before buying back the position on market weakness. Otherwise our equity strategy remained largely unchanged during June and our regional bias is towards Asia and the US. Following a strategic decision to lengthen bond maturities in May through US 20-year TIPS and German 30-year government bonds, trading activity was relatively low in June. We added a 6% weighting to US 10-year treasuries around 11 June on the basis that the recent weakness in US bonds was overdone. This position was closed out on 26 June for a gain of 3.4%. Apart from a taking a small weighting in the Australian dollar towards the end of the month our foreign currency exposure has remained relatively unchanged during June. Outlook There is still a great deal of skepticism over the likelihood of a "V" shaped recovery in equities this year. This is perhaps understandable given the tumultuous two years we have just experienced, and which many investors will have never experienced before. The rally in bonds since mid-June has been almost as abrupt as the previous decline. For example, the rise in 2-year bond yields in the US, UK and European bonds has been entirely reversed. Longer maturity yields are more attractive than at the end of the first quarter, but no longer offer the outstanding opportunity they did during June, such is the pace of recent market moves. In summary, markets are still expressing significant doubt about the sustainability of the rally this year. We think this caution represents a good opportunity to take advantage of valuations that are not yet reflecting a return to economic growth. We believe that emerging market equities are still in a position to outperform the broader markets, and that industrial stocks in particular will benefit from improving data in the second half of the year.   Ashburton Replica Asset Man USD comment - Mar 08 Friday, 15 May 2009 Fund Manager Comment Review The first week of March saw continued selling pressure for global equities which forced many of the world's major stock indices down to levels not seen since the mid 90s. The main catalyst, unsurprisingly, was the continuing bleak US economic data; mortgage delinquencies increased, construction projects fell twice as much as forecast and the unemployment rate hit 8.1%. Moreover, AIG (One of the biggest US insurance groups) reported the largest corporate loss in US history at $61.7bn. Despite the dreadful economic data flow and faltering equity markets bond yields remained fairly stable. That was until 18 March when the FOMC announced a decision to increase the size the Fed's balance sheet further by purchasing $750bn of agency mortgage backed securities. To help in the private credit markets the committee also decided to purchase up to $300bn of longer term Treasury securities over the next 6 months. This forced bond yields to tumble and provided solace for the equity markets with the MSCI world equity index finishing the month up over 7%. Activity We have trimmed our equity weightings into recent strength. This is expected to be a short-term decision since a re-test of the March lows remains a possibility despite a broadly improving backdrop for equities. In terms of regional and sector allocation, we maintain a bias towards non-Japan Asian markets. We remain overweight in industrials and materials stocks where we see potential beneficiaries of government infrastructure spending. At the same time as reducing equity exposure, we have added to non-financial investment grade corporate bonds and we plan to build gradually a diversified holding in high quality corporate bonds, where we believe spreads offer attractive compensation for default risk. We have so far primarily focused on the consumer staples, telecoms and energy sectors. We have begun to reduce our allocation to government bonds. With the announcement of quantitative easing (central bank purchases of government bonds) in the US and UK, much of the good news is now in the price. While keeping currency exposures largely in base currency, we have profited from strength in the Norwegian krone across all our Multi-Asset Funds. After a strong run in the krone, we have greatly reduced this position recently, but we are likely to look for a future attractive entry point given the country's superior economic fundamentals. Outlook In terms of prospective strategy, the question most preoccupying investors at the current juncture is whether the bear market in equities is finally over. We believe there is a good chance that the early March lows marked the bottom, although a re-test of those lows is very plausible. At those lows the implied premium offered for taking on equity risk was close the post-war high reached in the mid 1970s. Unlike the previous rallies we have seen in this bear market, the current rally is occurring at a time when the US and Chinese economies may slowly begin to turn the corner, especially with the US stimulus beginning to impact as highlighted above. Also different this time is the number of other markets showing more convincing signs of recovery, including commodities and inflation expectations implied by the bond market. The market environment, however, remains febrile, with great uncertainty and any number of risks. Renewed fears over Western banks, Eastern European economies, dividend cuts, protectionism or a growing sense that the world's leaders cannot reach consensus on tackling the recession are all candidates. This explains our current moderate equity weighting, especially in light of March's strong run and current levels of volatility. We do, however, expect to increase equity weightings on weakness over the coming months. It will not be smooth sailing for some time yet, but the storm that has engulfed the world's financial markets may finally be easing.   Ashburton Replica Asset Man USD comment - Dec 08 Wednesday, 25 March 2009 Fund Manager Comment The MSCI world equity index managed a modest rally in December, up 3.1% on the month. We modestly increased the equity allocation in December, as we were comforted by the positive tone of Obama's spending plans. We believe corporate bonds offer a very good opportunity to make high risk-adjusted returns. An expected Obama fiscal stimulus should be implemented in the second half of the year, if not earlier. At some point in 2009, we believe equities and other risky assets will enjoy a powerful rally that will last several months   Ashburton Replica Asset Man USD comment - Sep 08 Thursday, 30 October 2008 Fund Manager Comment The month of September 2008 will go down in history as one of the most dramatic financial crises of modern times: the S&P500 was down over 9%, volatility spiked to new highs and the yield on the US T-bill dropped as low as 0.25%. Optimism over the bailout of Fannie Mae and Freddie Mac at the start of the month was largely overtaken by fears over growth and the imminent collapse of Lehman Brothers, a large US investment bank. Indeed the demise of Lehman Brothers saw equity markets tumble and bond prices soar as investors flocked to the relative safety of government bonds, unsure which institution would be next in the firing line. The dollar rally also hit a brick wall, as all thoughts of America leading the world into a recovery phase quickly flew out the window. The financial press were quick to draw parallels to the great depression of the 1930s and the world's policy makers were quick to step in to try and restore confidence. The US government took a series of actions - a US $700bn proposal to address the crisis to buy troubled assets from banks, together with guarantees on money market funds and the banning of short selling financial stocks. This led to a ferocious relief rally as investors poured money into stocks and out of bonds. This was short lived, however, as the initial deal was rejected with the main bugbear for congress being why the US tax payer should take the burden. Subsequently, the deal was reworked and passed on Friday 3 October but failed again to buoy the troubled credit and equity markets. .   Ashburton Replica Asset Man USD comment - Jun 08 Tuesday, 26 August 2008 Fund Manager Comment With the oil price surging another $10 this month to over $140 barrel, equity markets were hit hard by aggressive selling and the MSCI world index finished down over 8%. June also proved to be a topsy-turvy sort of month for bonds. It started badly, as rising commodity prices finally took their toll on inflationary expectations. European bonds performed particularly badly in this phase, as the European Central Bank surprised everyone and announced their intention to hike interest rates in July, despite clear signs that the Eurozone economy is clearly slowing. The markets quickly moved to discount not just one hike, but several. However, bonds stabilised and recovered in the second half of the month as falling equity markets caused investors to rethink their pessimistic interest rate expectations. The currency markets also remained focussed on inflation risks and the likely policy response by central bankers during June. The lack of clarity about central banks possible actions has added to investors uncertainty about the outlook for currencies. The most affected currency was the New Zealand dollar which experienced a dramatic sell-off following an explicit statement from the Reserve Bank of New Zealand (RBNZ) that it was likely to cut rates later this year. Despite further poor headlines from the financial sector, sterling held up exceptionally well and was the best performing G10 currency over the month.   Ashburton Replica Asset Man USD comment - Mar 08 Monday, 19 May 2008 Fund Manager Comment We saw continuing weakness in equity markets in March and the lows of mid-January were re-tested. Thankfully these lows have held, at least for now, and markets have staged something of a rally into the month end. The MSCI world index was down 1.25% on the month in dollar terms. The Fed cut rates by 75 basis points on 17 March, and has now cut rates by 3% since last September. More importantly, they stepped in to stop the collapse of Bear Stearns, the (then) fifth largest US investment bank. The Fed has clearly signalled that it will act to protect large financial institutions from collapse and markets have been comforted by this realisation. Bonds started the month on a strong note, with buying interest fuelled by the ongoing 'credit crunch' and expectations of further cuts in interest rates, particularly in America. However, prices peaked when the Fed delivered the expected 75bps cut. Investors' appetite for bonds was further curtailed by the Fed's decisive action over Bear Stearns and its decision to broaden the scope of its loan facilities. Net of all these swings, bonds ended the month pretty much where they started it. March also proved to be a volatile month within the foreign exchange arena. Two to three big figure swings were the norm for most of the major currency pairs highlighting the lack of market direction and general investor uncertainty throughout the global markets. The major FX headline was the move in dollar-yen as the Japanese yen appreciated sharply and moved below the psychologically important 100 level for the first time since 1995.   Ashburton Replica Asset Man USD comment - Dec 07 Monday, 18 February 2008 Fund Manager Comment Although the month started solidly, the Fed's 25 basis point rate cut on 11 December was insufficient to reassure equity investors and the MSCI fell over 6% in five trading sessions. In this uncertain environment, the main focus for our Managed Services has been limiting risk and volatility. Our main calls in terms of equity strategy have been to keep overall equity exposure relatively neutral with a continued bias towards Asia ex-Japan where strong economic growth (particularly in China and India) is supporting a healthy uptrend in corporate profits. Bond yields edged higher in December as central banks stepped up their combined effort to ease the global 'credit crunch'. Not only have interest rates been cut (US, UK and Canada all reduced by 0.25%), but significant amounts of liquidity have been injected to the money markets, more latterly by way of auction. This decisive action has seen inter-bank rates fall significantly and helped to sooth investors' fears regarding the outlook for economic growth. Elsewhere, the currency markets saw the US dollar stabilise whilst sterling sold-off dramatically. Vulnerability of the UK to the global credit crunch became ever clearer meaning sterling weakened, particularly when the monetary Policy Committee sounded a more 'dovish' tone on interest rate policy. We built up foreign currency exposure for sterling-based accounts and initiated new long positions in both the Canadian dollar and the euro, both of which returned healthy profits. Moreover, we felt the US dollar was due a bounce given that it was technically oversold and very much out of favour. We therefore reduced foreign currency exposure for our dollar-based services and tentatively introduced a small exposure to the US dollar for sterling and euro-based portfolios.   Ashburton Replica Asset Man USD comment - Sep 07 Wednesday, 24 October 2007 Fund Manager Comment The month end performance for global equity markets masks incredible volatility. The world of structured finance, whether in the form of mortgage backed securities or otherwise, is putting incredible strain on banking operations. Even though equity markets have rebounded, banking operations have yet to resume as normal. Our European investments have served us very well in recent months but earnings momentum is waning and exposure to securitised debt is probably larger than most realise. Conversely, we have significantly increased our US exposure. While it appears that the root of recent volatility is within America, it is precisely this volatility that generates opportunities. We remain optimistic on Asia. Bond prices ended a topsy-turvy month much where they started it. The bond market surged in the early part of the month, as the deepening credit crunch fed expectations of dramatic economic slowdown and a general easing in monetary policy. Our currency strategy worked well for us during the month, having increased our weighting outside base currency for both our sterling and dollar services. Our long positions included the Canadian dollar and Norwegian krone, both of which rallied strongly during the month.   Ashburton Replica Asset Man USD comment - Jun 07 Wednesday, 26 September 2007 Fund Manager Comment Bonds are usually at their best when investors are generally miserable. After all, interest rates usually get reduced when the economy is in trouble. Bonds' last day in the sun came in the second half of 2006 when the markets were dogged by concerns about the US deflating property market and what it might mean for the American consumer and the health of the financial system itself. As those fears have dissipated, so bonds have sold off, continuing a negative trend that began as long ago as 2003 in the case of the US bond market. This trend continued in the early half of June as investors finally abandoned all thoughts of US interest rate reductions at least in the near future. Although equities remain cheap relative to bonds, they can only ignore the bond market for so long. Once the rate of change in bonds reaches a certain level, the uptrend in share prices tends to stall. We saw this in February 2007, May 2006 and several times before that. As equity markets levelled out and worries about the US sub-prime mortgages returned, bonds stabilised and recovered a little. Most bond markets finished the month underwater, however. 'Carry' remained the dominant theme in the foreign exchange markets, with currencies backed by high/rising interest rates strengthening against those with low/stable interest rates. The big winners were the New Zealand dollar and the Australian dollar and, once again, the big loser was the Japanese yen.   Ashburton Replica Asset Man USD comment - Mar 07 Wednesday, 20 June 2007 Fund Manager Comment In the past couple of years, all the major regions have experienced buoyant economic conditions. Even Europe, for so long the economic laggard, has seen unemployment fall to its lowest levels for years. During the first quarter, there were the first signs that this period of unusually high synchronisation may be coming to an end. Peaking property prices and stress in the sub-prime mortgage market have clearly taken their toll on the American economy, which has slowed noticeably as a result. Just a few years, ago the US consumer was a lone bright light in a troubled world - with that light now dimmed, is the world once again heading for troubled times? In our view, Europe and most particularly Asia are well placed to take up the slack from the US consumer. However, this is still just a theory and in the first quarter, markets took fright that this would not be the case. After a promising start to the year, equity markets dropped spectacularly in late February, with the S&P500 registering its biggest one-day decline since 2003. Meanwhile bonds briefly enjoyed their moment in the sun as investors started to sense that a peak in American interest rates might be at hand. Overall, both markets finished the period marginally in positive territory.   Ashburton Replica Asset Man USD comment - Dec 06 Wednesday, 28 February 2007 Fund Manager Comment Despite global equity markets all being in positive territory for the quarter, the performance results were mixed. Whilst Asia was up just over 15% and raced ahead of Europe and the US (both up 7%), Japan was the notable laggard and managed just a 5% gain over the quarter. After rallying during October and November, global bond markets gave up most of their gains during December to finish the quarter relatively unchanged and sentiment levels are now back towards more neutral levels. The currency markets were dominated by the plight of the US dollar which fell substantially versus both sterling and the euro. The yen continued to weaken against the major crosses as traders continued to exploit the carry trade. During the quarter we conducted several changes to strategy, whilst remaining slightly optimistic on equities we moderately raised our China, India and Japan exposure. Elsewhere for currency strategy, we reduced our yen exposure throughout the quarter and switched half of our existing Norwegian krone position into the Swiss franc, whilst in December we took euro exposure for all our asset management services. On the bond front, we switched all of our short-dated US inflation linked securities into the short-end of the UK bond market and later took exposure to the short end of the Norwegian bond market. Finally, we traded in gold during the quarter, taking profits along the way and at present there is actively a 5% long position.   Ashburton Replica Asset Man USD comment - Sep 06 Wednesday, 29 November 2006 Fund Manager Comment As the third quarter got underway, equities were just starting to recover their poise following the sharp losses of May and June. As it turned out, it was a solid quarter for the equity markets, with all the major global indices posting positive returns and were helped by the falling oil price. Worries about rising interest rates (particularly in America) had been the main cause of the stock-market correction in the second quarter and we expected slowing economic growth and the easing of these rate concerns to provide the catalyst for a recovery. In anticipation of better market conditions, we took the decision to unhedge the remainder of our Japanese equity position in mid-June, just days before the low for the year. Bond prices bottomed just ahead of the quarter end and rose sharply thereafter, with the US market leading the way (up nearly 4% on the quarter). We took advantage of this rally and took profits on our US bond positions, rotating into some of the laggards: UK bonds, Australian bonds and, more recently, US inflation-linked bonds. Although we are nervous about the near-term outlook for bonds, we still believe that the economic slowdown scenario will ultimately see bond prices hit new highs for the year. We are therefore keen to use near-term setbacks to rebuild our exposure.   Ashburton Replica Asset Man USD comment - Jun 06 Thursday, 24 August 2006 Fund Manager Comment The second quarter of the year saw equity markets come under pressure as heavy selling caused global equity indices to correct sharply, April saw equity markets supported by strong economic growth. However, Global equities corrected sharply in May as a raft of bad news (rising interest rates and inflation, the high oil price and peaking US property prices) finally took their toll on investor sentiment, with markets like India and Russia registering double-digit losses. Although the markets managed to claw back some of the losses during June, buying momentum was weak. causing most global indices to post negative returns during the quarter. Bonds were under pressure for most of April particularly at the longer end of yield curves as investors and analysts alike revised up their forecasts for interest rates and were generally range-bound throughout May. However, the first half of June saw a fair amount of volatility in anticipation of the Fed's decision on US interest rates. Despite the Fed raising rates by 25 bps during the last week of June, bonds rallied as the statement that accompanied the decision was far less hawkish than expected, thereby suggesting that the Fed may end its run of interest rate increases. There were several strategy changes in the Asset Management Service during the quarter. First, we took a profit on our position in the Norwegian krona, switching the proceeds into the Swiss franc. Second, following a close in the Topix index above an area of major technical resistance on the charts, we decided to slightly increase our exposure to Japanese equities, whilst in June we increased our bond weighing through the purchase of US 10-year fixed paper.   Ashburton Replica Asset Man USD comment - Nov 05 Tuesday, 13 December 2005 Fund Manager Comment All major stock markets posted positive returns during November with the Nikkei being the best of the bunch climbing over 9%. The US equity indices started the month in good form after higher than expected GDP figures and a report showing an improvement in worker productivity and a continuation of the strong earnings season. This gave impetus for UK and European markets which were buoyed further from an easing oil price and finished the month up over 3%. The bond markets were fairly volatile throughout November which saw increased buying in US treasuries forcing 10 year yields lower. The UK bond market was also particularly strong, finishing the month up over 1%. The Federal Reserve raised interest rates by a further 25bps at the start of November to 4%. Although this was widely expected and priced into the currency markets the dollar continued to strengthen throughout the month against most of the majors which pushed the dollar index up almost 2% on the month. Despite the dollar being particularly firm, the gold price rallied strongly throughout November and finished the month up nearly 9% touching $500 per ounce. There were a few changes to our bond strategy during November: at the start of the month we switched our longer dated TIPS into similar dated fixed income securities. Throughout the month we gradually reduced all of our exposure to fixed income securities switching them back into short dated inflation linked bonds.   Ashburton Replica Asset Man USD comment - Sep 05 Monday, 21 November 2005 Fund Manager Comment The terrorist attacks in the City of London at the start of the July overshadowed any trading news. Although the major equity markets initially sold off, they displayed true resilience and recovered within a day. The month of August was dominated by oil, as firm demand and supply concerns combined to push the price of Brent Crude to over USD68 per barrel. Not surprisingly, this development stopped the summer equity market rally in its tracks, with most markets registering little or no gains on the month. The one big exception was Japan, as hopes were running high that September's elections would herald a new round of economic reform. The Nikkei's rally continued throughout September following Koizumi's much better than expected re-election and finished the quarter up nearly 20%. After a disappointing month in July, bonds rebounded during August, buoyed by sagging equities, softer US economic data and hurricane Katrina. UK bonds were supported further by the 0.25% reduction in interest rates. During September the bond markets sustained a period of consolidation, with the US and Japan both falling around 1.5%. However, US inflation-linked bonds (TIPS) held up particularly well relative to conventional bonds despite poor market conditions during the quarter. Towards the end of the quarter, we switched half of our Swedish krona position into the Singapore dollar with a position in Singapore government bonds. In addition, we switched our weighting in 5-year TIPS into 20-year TIPS.   Ashburton Replica Asset Man USD comment - Aug 05 Thursday, 15 September 2005 Fund Manager Comment The month of August was dominated by oil, as firm demand and supply concerns combined to push the price of Brent Crude to over $68 per barrel, a new record high. Not surprisingly, this development stopped the summer equity market rally in its tracks, with most markets registering little or no gains on the month. The one big exception in this regard was Japan, where hopes are running high that next month's elections will herald a new round of economic reform. After a shaky start, bonds rebounded into the month-end, supported by sagging equities, softer US economic data and hurricane Katrina. UK bonds were further boosted of a 0.25% reduction in interest rates. In the currency markets, the dollar continued to drift lower, as investors cut long positions and started to pare back their expectations for interest rates. The pound was one of main beneficiaries, as speculation of further UK rate cuts faded. Asian currencies lagged a little, as the excitement surrounding the Chinese currency revaluation died down. There were no major strategy changes during August.   Ashburton Replica Asset Man USD comment - Jul 05 Friday, 26 August 2005 Fund Manager Comment A combination of high oil prices and rising US inflation and interest rates finally took their toll on investor sentiment during the start of the quarter, with most stockmarkets registering losses during the month of April. The Nikkei proved to be the weakest of the bunch falling over 6%. A steep fall in the oil price helped the Dow and S&P to rally throughout May which provided impetus for other global equity indices. However, equities saw a period of consolidation during the remainder of the quarter with both the Dow and Nikkei actually finishing lower on the quarter. The volatile and weak equity markets caused investors to seek out the relative safety of fixed income securities at the start of the quarter. Bonds continued to advance into May with German government 10 year yields hitting a 109 year low, fuelled by a weakening economy and high unemployment (now over 11%). Elsewhere, the currency markets were dominated by the strength of the US dollar, gaining over 5% and 8% versus the pound and the euro respectively. There were several strategy changes to the Asset Management Service during the quarter. After holding both Swiss francs and Singapore dollars, we took profits early on and switched both positions into the Swedish krona. In addition, we moved half of our Japanese yen exposure into the euro. On the bond front, we took profits on our 7-10 year US bonds, switching into more conservative short-dated and inflation-linked bonds and later increased our TIPS weightings with 8-10 year notes. Moreover, we took a more defensive stance on equities by hedging all of our European exposure with equity futures.   Ashburton Replica Asset Man USD comment - Mar 05 Monday, 6 June 2005 Fund Manager Comment Most equity markets had a lacklustre month during January before a sharp rally in US equities during the first half of February provided impetus for both European and Japanese indices to move. However, a sharp correction ensued after Fed Chairman Alan Greenspan gave his semi-annual monetary testimony. He suggested that the US economy was on a sound footing but monetary policy was still viewed as too accommodative. This coupled with the inexorable rise in the oil price caused US equities to sell off, with Wall Street finishing down on the quarter. Global bond markets have had an uninspiring quarter. After posting steady, if not spectacular gains during January and the first half of February, Greenspan's semi-annual monetary testimony initiated a significant sell-off with most markets breaking through key support levels. Thereafter, bonds continued in a downtrend for the remainder of the quarter to finish in negative territory. During the quarter, we remained relatively defensive on bond strategy. We first took exposure to short-dated US inflation linked notes before switching these into fixed notes with similar duration. Later on, we lengthened our duration by switching our short-dated positions into 10 year fixed notes. We were particularly active on our currency strategy throughout the quarter: switching between the pound, dollar, yen, Canadian dollar, Swiss franc and the Swedish krona.   Ashburton Replica Asset Man USD comment - Dec 04 Wednesday, 23 March 2005 Fund Manager Comment Stock markets posted positive returns on the quarter. US equities rallied sharply at the beginning of November following the outcome of the Presidential election and momentum was sustained after a sharp fall in the oil price (down 15% on the quarter). US stocks were lifted further after the Federal Reserve cited an improving economy and labour market, when it raised its benchmark lending rate for the fifth time this year. This culminated in the Dow Jones and S&P finishing the quarter up 6% and 7% respectively, which provided impetus for European and Asian equities to also finish the quarter higher. In the bond markets, US treasuries had a volatile quarter: disappointing new job creation figures during October pushed the 10-year yield lower, whilst a heavy sell-off was initiated in November after bearish comments came from Fed Chairman Alan Greenspan. However, an increase in buying activity was set off in December, which culminated in treasuries finishing relatively unchanged on the quarter. Several strategy changes were implemented during the last quarter for the Asset Management Service. Initially, we raised our exposure to the pound by selling the Australian dollar. Later, we took profits on all our Canadian bond holdings and a proportion of our New Zealand government bond positions, replacing them with short-dated US bonds. Most recently, we switched part of our US dollar position into the Canadian dollar and, following a recent burst of strength, we switched half of our Canadian dollar position back into US dollars.   Ashburton Replica Asset Man USD comment - Nov 04 Monday, 3 January 2005 Fund Manager Comment US equity markets rallied sharply at the beginning of the month following the outcome of the Presidential election. Momentum was further sustained after strong non-farm payroll data and a fall in the oil price below the important $50 level. US stocks were lifted further after the Federal Reserve cited an improving economy and labour market when it raised its benchmark lending rate for the fourth time this year (+25bps to 2%). This culminated in the S&P being pushed to its highest level since August 2001, which provided impetus for European and Asian equities to end the month higher. US bonds started the month on a weak note due to the strong new jobs creation figure which sent treasuries tumbling. After a small period of consolidation, a further sell off was initiated during the middle of the month after Fed Chairman Alan Greenspan warned that dollar-denominated assets will lose appeal to foreign investors over time. Greenspan's comments, not surprisingly, had a negative impact on the dollar itself which weakened considerably for the remainder of November against the majors and also pushed the gold price to new highs.During the month of November, we took profits on all of our Canadian bond holdings and a proportion of our New Zealand government bond positions, replacing them with short-dated US bonds. We believe that the US dollar is approaching a low of some significance and, on recovery, would almost certainly lead to a reversal of recent flows.   Ashburton Replica Asset Man USD comment - Sep 04 Thursday, 18 November 2004 Fund Manager Comment Oil dominated the markets during the third quarter - essentially, unrest in Iraq and the recent troubles in Nigeria pushed the oil price to new highs. The high oil price and its negative implications for economic growth then took its toll on the equity markets resulting in the global equity index ending the quarter marginally lower. Whilst the broader Asian region (Australia, Hong Kong, South Korea etc.) performed well, Japan was disappointing and fell nearly 10% over the quarter. The FTSE, however, ended the quarter up albeit marginally. The troubled equity markets, and general slowing in economic activity, helped to propel bond prices to their highest level for several months. US 10 year yields dropped below 4% during the quarter and despite a significant drop in yield support, the US dollar only experienced mild losses versus the euro and actually strengthened slightly versus the yen and pound. There was one change to equity strategy during the third quarter. Given our increasing optimism with regard to Asia, we increased the Asset Management weighting in the region by 5% to 30%, leaving the overall equity weighting (including gold shares) at 46%. We took a more defensive move on the bond front switching our US TIPS position into shorter-dated New Zealand bonds. Only one currency strategy change was implemented during the quarter: we switched out of the Singapore dollar and took exposure to the pound which is now particularly oversold.   Ashburton Replica Asset Man USD comment - Aug 04 Friday, 17 September 2004 Fund Manager Comment Oil remained in the spotlight during August as unrest in Iraq and political uncertainty in Venezuela pushed its price to new highs for this cycle. Equities, already shaky due to interest rate hikes and slowing economic growth, sagged in the face of the prospect of another oil crisis. However, it was not to last. Easing supply-side concerns eventually saw European Brent crude fall back sharply to $39 per barrel - over 7 dollars below its high and 2 dollars down on the month. As the oil price relapsed, so equities rebounded, with most markets finishing the month pretty much unchanged. Bonds performed rather better than one might have expected, rallying when stockmarkets fell but then clinging on to those gains when equities recovered. The US bond market rose to its highest level in almost five months. The dollar was relatively resilient despite a significant downwards revision in US interest rate expectations, registering only a minor loss against the euro and actually gaining versus the pound. During the month of August, the Asset Management Service raised its exposure to the pound (selling the Singapore dollar) and switched the emphasis of bond strategy away from America to the laggard New Zealand market, adopting a much more defensive stance in the process. Click here for original article   Ashburton Replica Asset Man USD comment - Jun 04 Wednesday, 1 September 2004 Fund Manager Comment Markets were dominated by oil, interest rates and China. Strong economic growth combined with tensions in the Middle East saw the oil price climb above USD40. In America, strong jobs' data precipitated a big rethink on interest rates, now widely expected to rise considerably in the year ahead. Meanwhile, rising inflation in China led to concerns that the growth cycle may be coming to an abrupt end. The net result was a sharp fall in bond prices and a correction in share prices, particularly in Asia. The Japanese equity market was particularly unstable, tumbling over 10% in May before climbing back to finish slightly up on the quarter. During April, the fund manager's added to the funds existing position in gold shares and increased the funds exposure to bonds, with particular emphasis on the United States. There were several changes to currency strategy: the fund manager's took profits on the Norwegian krona and half the funds yen position (subsequently reinstated at lower levels); in June, the fund manager's switched all of the funds Swedish krona position into pounds and introduced exposure to the Australian and Singapore dollars. Ashburton's Asset Management Services all experienced losses during the quarter.   Ashburton Replica Asset Man USD comment - Mar 04 Wednesday, 19 May 2004 Fund Manager Comment Most stock markets gained at the start of the year, with the Dow and S&P posting new cyclical highs. However, many Western stock markets declined into February and March after weaker than expected new job figures in the US cast doubt over the economic recovery. Elsewhere, the Nikkei rallied to new highs after stronger than expected GDP figures were announced during February. In the same month, currency markets, the US dollar hit new lows versus the euro and the pound. Massive intervention, however, by the Bank of Japan brought about a recovery in the US dollar versus the yen - ultimately forcing the US dollar to strengthen versus the pound and the euro towards the end of the month and into March. The Gold price then continued to climb throughout March despite the strong US dollar, with the result that the euro gold price soared, breaking out of a one-year trading range. During the quarter, we raised our European equity weighting following the correction in the equity markets and also increased our exposure to Asian equities (mainly Japan). The improving technical picture for gold also meant we introduced a 4% weighting in gold shares. In addition to this, we took exposure to the yen by closing our yen hedges towards the end of February for Sterling and Euro Asset Management Funds. The Fund increased by 3.1% over the quarter.   Ashburton Replica Asset Man USD comment - Dec 03 Tuesday, 10 February 2004 Fund Manager Comment The global economic recovery continued to gather momentum in the fourth quarter, with even Europe showing some signs of improvement. Most notably, the US economy was announced as having grown at an annualised rate of 8.2% in the third quarter. The improving economic environment finally started to put upward pressure on interest rates, with hikes seen in both Australia and Britain. However, bonds largely shrugged off this news, registering only minor losses in the final quarter, as huge purchases of US Treasuries by Asian central banks put a cap on bond yields. The US dollar remained weak, particularly versus the euro, pound and commodity-linked currencies, as investors continued to fret about the large current account deficit and the extremely low level of US interest rates. Global stockmarkets recovered strongly from their September lows, as investors drew solace from the better economic news and the stability of bonds. Japan lagged the move higher, held back by political worries and the strong yen. Bond weightings were rebuilt during the quarter in anticipation of a short-term recovery. The Japanese equity weighting was raised at the market's low point in November. Profits were taken on some of the fund's European currency positions and US dollar weightings were raised as the year came to a close. The Asset Management Funds all posted gains on the quarter. The fund increased by 3.5% over the quarter.   Ashburton Replica Asset Man USD comment -Sep 03 Friday, 14 November 2003 Fund Manager Comment Western equity markets made steady rather than spectacular progress over the quarter, as the mix of company news was more positive than generally expected. The clear exception was the Japanese and the Asian economies, which have benefited from a steady stream of positive economic news. Japan saw a pick-up in Gross Domestic Product, which gave investors heart that the painful restructuring of the economy is finally bearing fruit. It is perhaps too early to say that Japan has turned the corner, after all, the Nikkei recorded its lowest point for over 20 years only in April. However, the signs are more encouraging now than for a long period, as evidenced by the gradual easing of Japan's deflationary problems. Both bond and currency markets had a volatile quarter. The early part of summer was characterised by stronger than expected market data, which saw investors selling bonds and buying the US dollar. This situation reversed as hopes of economic recovery faltered, cancelling out all of the US dollar's gain against the euro and ensuring bond prices moved little over the quarter. The Asset Management Funds all showed strong returns over the quarter. This fund increased by 5.2% over the quarter.   Ashburton Replica Asset Man USD comment -Jun 03 Friday, 15 August 2003 Fund Manager Comment Global equity markets had a Second quarter impressive rally, driven by a combination of factors, including the end of the conflict in Iraq, further cuts in short term interest rates coupled with a sharp fall in bond yields and better than expected first quarter earnings. European equities led the charge higher given they had been sold off the hardest ahead of the war, despite the strong euro and some pretty unattractive economic fundamentals, indicating that all the bad news was already fully reflected in the region's low valuation. Early in the period, the SARS virus hit the Asian markets but its adverse economic impact proved to be transitory and Asian equities have played catch up into the end of the quarter. Greenspan's comments in May that he was concerned about the outlook for the American economy set the bond market alight and the US long bond surged to levels not seen for fifty years. It had also been in his interest to 'talk-up' bonds, allowing US consumers to refinance their mortgages at record low levels, increasing their disposable income and shoring up the economy. Towards the end of the quarter, we have seen some of this heat coming out the market and yields in all major markets rising sharply. It is perhaps too early to say but it does appear that the low in US long bond yields of 4.17% in mid June may mark a major turning point.   Ashburton Replica Asset Man USD comment -Mar 03 Wednesday, 28 May 2003 Fund Manager Comment The first quarter of 2003 has been totally dominated by the Iraq situation and the ultimately doomed diplomatic effort to avoid a second Gulf War. Whereas in the 1991 conflict the establishment of a broad international consensus to rid Kuwait of Saddam Hussein was seen as extremely positive for economic development, the current split between the US/British camp and leading opponents such as France, Germany and Russia could have grave consequences for the UN and NATO alliances. For much of the period, equities markets were not the place to be as indexes fell towards their October lows. This was further propelled by the diplomatic fallout and poor manufacturing and consumer confidence numbers. A market that hates uncertainty rallied strongly as statements following the Azores summit signalled that a military strike was all but inevitable. During the first few days of the conflict, over-optimistic estimates of Baghdad falling within weeks pushed equities higher but as it became clear that Iraqi resistance was stronger than first thought, much of these gains were retraced. Asset Management Funds' defensive posture have served clients well throughout this difficult period. The fund was down 0.8% over the month.   Ashburton Replica Asset Man USD comment -Jan 03 Tuesday, 25 February 2003 Fund Manager Comment After three years of falling stockmarkets, most commentators believed that 2003 would draw a line under the equity bear market and investors could start to enjoy positive share returns once more. Unfortunately, not for the first time in this downturn, market opinion was turned on its head, with the Euro Stoxx index of the 50 largest companies in Europe recording its largest January fall since the index was launched in 1987. The markets have simply not been in any mood to rally whilst the US is on a war footing with Iraq. What is perhaps more disturbing is the fact that they have continued to fall towards the October lows and, in the case of the FTSE, exceed that mark. The UK market has registered a record breaking 12 consecutive daily losses, halving the index value from its high point on the last trading day of the millennium. In January, Asset Management took the healthy profit accrued by the 6% exposure to Australian dollars, introduced back in July of last year,. This gave sterling based clients the opportunity to increase their US dollar exposure by a further 6%. With their low exposure to equities, the Asset Management Funds were largely insulated against the stock market falls of January. The fund dropped 0.3% over the month.   Ashburton Replica Asset Man USD comment -Dec 02 Friday, 14 February 2003 Fund Manager Comment Equities on both sides of the Atlantic ended the final quarter in positive territory - despite exceeding the summer lows in early October. There has also been evidence that the current upturn may be more sustainable than the brief rally experienced in July, as bond yields have begun to recover from their low points. However, the fragile climate led the Federal Reserve to cut interest rates by a further 50 basis points, to avoid the nightmare scenario of a 'double-dip' recession, or even deflation. Belatedly, the European Central Bank followed suit. International tensions became more prominent with war in Iraq now seeming certain and this prospect has weighed upon sentiment like the proverbial albatross, tempering any significant rises in equity markets. In fact, over recent weeks, a series of events has conspired to further darken the mood. A negative reaction from the US to the Iraqi weapons declaration, North Korea breaking the nuclear nonproliferation treaty and general strikes in Venezuela have pushed bonds, oil and gold higher whilst equities have been, at best, treading water. The fund increased 0.4% over the quarter.   Ashburton Replica Asset Man USD comment -Oct 02 Monday, 18 November 2002 Fund Manager Comment It was inevitable that the dramatic collapse in world stock markets of recent months would eventually lead to some sort of short-term recovery. The S&P 500 and the FISE 100 both rose over 8% and in Germany, where the fail had been the sharpest, the bounce was nearly 14%. The key question now is whether this rally is more sustainable than that of July, or whether there is another painful downward spiral looming on the horizon. There is evidence that the current upturn may be more sustainable than the one witnessed in the summer. For one thing, unlike July, bonds have lost some of their recent strength, with US 10-year yields now back over 4% following their low of 3.55% in early October. Equities were further underpinned by an easing of tensions surrounding the Iraq 'crisis' and an increasing likelihood of further cuts to interest rates. Bond weightings were raised following the mid-month sell-off. An 18% weighting in Inflation-linked bonds was introduced (12% Europe and 6% USA), which was partly funded through the sale of Swedish inflation-linked bonds. At the month-end, the European fixed income weighting was halved to 6%. The fund was virtually unchanged on the month.   Ashburton Replica Asset Man USD comment -Sep 02 Tuesday, 12 November 2002 Fund Manager Comment Equities experienced another difficult quarter with most of the major indices posting new lows for this cycle. At its low the S&P500 was 50% below its all-time high. The Nikkei hit 19-year lows, European markets were particularly hard hit, with confidence undermined by a combination of slowing growth, an obstinate ECB and the possibility of tighter fiscal policy. Matters were not helped in this regard by the Iraq 'crisis' and the resulting rise in the oil price to new 12-month highs. Bonds enjoyed a quarter of solid gains driven by evidence of slowing economic growth and safe-haven flows out of equities. For the first time since 1998 investors started to talk about the risks of global deflation, US bonds led the way higher, with yields hitting 40-year lows. The currency markets steadied following the sharp swings of the second quarter. The pound was the strongest major currency of choice, with investors drawn by the solid fundamentals and relative stability of the UK economy. Due to the sharp losses registered by global equities, the fund was 3.4% lower on the quarter.   Ashburton Replica Dollar Asset Management May 02 Wednesday, 26 June 2002 Fund Manager Comment May was a month in which storm clouds gathered over the global economy, the dollar weakened against both the euro and the yen, and western equity markets moved lower. Geo-political concerns preoccupied the markets, with ongoing tensions in the Middle East, the threat of nuclear conflict on the Indian sub-continent, and further terrorism threats puncturing any confidence inspired by the occasional positive piece of economic data. Japan, once again, bucked the trend with the Nikkei rising over 2%, as international investors switched from the US, whilst domestic investment was also strong. On the back of a good performance by bond markets in April, there was little appetite to push yields lower in May. The market continues to throw out conflicting signals regarding the recovery and each piece of encouraging news, at least at present, tempers any broad movement from equities to government debt. A further anchor to US bond prices is the ever-increasing government deficit, which has been exacerbated by tax cuts and has increased defence spending. As economic worries are now focused on the US economy, the dollar became the major causality, depreciating 3.26% and 3.33% against the yen and the euro respectively. There were a number of strategy changes in May. Asset Management took advantage of the recent recovery in the UK and Europe to trim exposure by 5%. The Asia Pacific weighting has been increased by the same percentage, as the region continues to show signs of cyclical recovery. We have also decided to temporarily reduce exposure to the euro and remove Swedish krona exposure, thereby locking in currency profits. Profit was also taken with the sale of the two-year Canadian bond holding. Replica Sterling and Global Sterling were up 1.04% and 1.05% on the month, whilst Replica Dollar rose 1.15% and Global Euro was down 0.37%.

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