Diversified Absolute Return Fund

Key points

• A truly MultiAsset portfolio
• A diversified portfolio of uncorrelated asset classes reduces volatility and provides opportunity to access returns in a variety of market conditions
• The objective is to offer investors consistent, positive returns in excess of LIBOR +2% over a three-year rolling period
• Investment management responsibility for the fund was taken over by John Husselbee of North Investment Partners on 13 September 2006
• Sector: IMA Global Growth

Current views

Global markets have, almost without exception, staged a dramatic recovery since their February lows. Investors have driven rebounds in a myriad of asset classes. So far this year your fund has returned 19.35%. October, however, proved to be the crescendo with markets generally finishing the month near where they began.

To strategically reposition the fund we have removed some ETF exposure in exchange for positions in more actively managed funds. For instance, as stock selection has become more important than ever in the commodities sector, we have rotated from quant-driven holdings to those involving more active management, as in the case of the Investec Enhanced Natural Resources Fund.

With interest rates and gilt yields low, investors are being driven to look for premium income and capital growth in higher risk assets. Given this environment, we continue to favour equities over bonds, looking to managers focused on larger, defensive, and income-producing stocks, such as Adrian Frost at the Artemis Income Fund.

We believe that a correction in both developed and emerging markets could be at hand and, if so, would provide an opportune entry point for investors ready to deploy cash.

Asset allocation