Objective and investment policy
The fund aims to provide a positive total return (combined income and capital growth) of 5-10% on average per year over any three-year period by investing in a mix of assets from anywhere in the world.
Investment policy and strategy
Core investment: The fund will typically invest within the following net allocation ranges:
• 0-80% in bonds
• 20-60% in company shares
• 0-20% in other assets (including convertibles and property-related securities)
The fund typically invests in the above assets via derivatives. It may also invest in assets directly or through other funds. The ranges shown above are on a net basis, that is, ‘long’ positions (investments that profit from a rise in asset prices) net of ‘short’ positions (investments held via derivatives that profit from a fall in asset prices). Using derivatives to invest also allows the fund to create ‘leverage’, meaning that the fund can gain exposure to investments that exceed its value, thus increasing potential returns (or losses) in both rising and falling markets. In addition, derivatives are used to reduce risk and costs and to manage the impact of changes in currency exchange rates on the fund’s investments.
Other investment: The fund may also invest in currencies and hold cash, deposits and warrants.
Strategy in brief: The fund is managed with a highly flexible investment approach. The investment manager has the freedom to allocate capital between different types of assets in response to changes in economic conditions and asset prices. The approach combines in-depth research to work out the ‘fair’ value of assets over the medium to long term, with analysis of the market’s short-term reactions to events, to identify investment opportunities. The fund seeks to manage risk by investing globally across multiple asset classes, sectors, currencies and countries. Where the investment manager believes opportunities are limited to a few areas, the portfolio may be very concentrated in certain assets or markets. The investment manager will normally hold atleast 30% of the fund in euro, and at least 60% in US dollar, sterling and euro combined.
Bonds: Loans to governments and companies that pay interest.
Convertibles: Bonds issued by companies that usually pay a set rate of interest and which can be exchanged for predetermined amounts of company shares.
Derivatives: Financial contracts whose value is derived from other assets.
Warrants: Financial contracts which allow the fund manager to buy stocks for a fixed price until a certain date.
Risks associated with the fund
The value of investments and the income from them will rise and fall. This will cause the fund price, as well as any income paid by the fund, to fall as well as rise. There is no guarantee the fund will achieve its objective, and you may not get back the amount you originally invested.
The fund may take short positions through the use of derivatives which are not backed by equivalent physical assets. Short positions reflect an investment view that the price of the underlying asset is expected to fall in value. Accordingly, if this view is incorrect and the asset rises in value, the short position will cause the Fund to incur a loss.
The value of the fund will fall if the issuer of a fixed income security held is unable to pay income payments or repay its debt (known as a default). Fixed income securities that pay a higher level of income usually have a lower credit rating because of the increased risk of default. The higher the rating the less likely it is that the issuer will default, but ratings are subject to change.
Changes in currency exchange rates will affect the value of your investment.
The manager will place transactions (including derivative transactions), hold positions and place cash on deposit with a range of financial institutions. There is a risk that the financial institutions may fail to meet their obligations or become insolvent.
The Fund allows for the extensive use of derivatives.