Build on initial strategy

Published on Friday 18 July 2008 21:26

OUR initial strategy in January was based on the expectation that markets would remain highly volatile and, bearing in mind the client's naturally cautious attitude to risk, we preferred to maintain a relatively cautious approach for the first half of the year.

Our prediction was indeed proved to be correct, although the recent fall off in markets has been more marked than we anticipated. We continued to build on this strategy by adding to the Blackrock UK Absolute Alpha and the SWIP Absolute Return Bond funds as well as creating a new holding in Neptune Balanced which has a large cash holding at present. The exposure to the Far East and European equities initially proved profitable but the performance has suffered recently, effectively wiping out the initial gains.

We planned to move more into global equities and reduce the UK equity exposure in the middle of the year as we expected markets to settle down once banks had declared their full bad debt exposure. However, bad news is still filtering through so we are inclined to sit tight and not make further changes until matters improve.

The portfolio asset allocation has altered over the last six months, in that the UK equity exposure has been reduced from 36 per cent to 31 per cent while the fixed-interest, cash and global equity exposure has been increased. The overall effect so far has seen the portfolio outperform the FTSE All Share index and the balanced managed sector. It remains to be seen what the second half of the year brings but we expect the rollercoaster to continue for a while yet.