The third quarter of 2015 created more pain and volatility for investors as concerns over China, along with growing uncertainty around interest rates, created havoc among share prices worldwide. During the normally quiet month of August (being in the northern hemisphere's summer vacation period), investors became increasingly concerned with the growth outlook for China, following the shift in the country's currency policy, which saw a 3% depreciation of the yuan between 10 and 13 August. This shift affected all emerging market currencies, while Chinese stocks in particular sold off indiscriminately.

As global investors returned from their summer break during the month of September, the focus shifted to the outlook for interest rates in the US. Investors were on tenterhooks going into the Federal Open Market Committee (FOMC) meeting mid-September. Markets initially experienced a relief rally on the news of no hike, only to succumb to more investor uncertainty regarding the timing of the eventual liftoff. US economic data points have been weak, contributing to the delay of these rate hikes. At the time of writing our commentary, this heightened level of uncertainty continues to drive short-term investor behaviour, and we anticipate this will continue to dominate investor sentiment for the foreseeable future. While the inevitable normalisation of interest rates in the developed global economies has been well flagged and widely anticipated, the fact that rates have been artificially depressed for so long, contributes to this sense of uncertainty and unchartered waters that investors around the world currently need to navigate.

Global emerging markets continued to suffer from these heightened fears around global growth, while acceleration in internal political and economic issues led to another credit downgrade to junk status for Brazil. The Brazilian financial markets continued to sell off amidst this uncertainty, leading to significant losses in some of our equity holdings, both from share price declines and weaker local currencies. Global equity markets performed very poorly over the quarter, with the MSCI World Index down 8.3% for the three-month period, and down 4.6% over the year. The MSCI All Country World Index (with its higher weighting to emerging markets) performed even worse, returning -9.3% for the quarter and -6.2% for the 12-month period. Oil gave back much of its recent bounce, and ended the quarter 22.1% lower and by just more than 50% over the last 12 months. Other commodities experienced equally vicious sell-offs. Gold, which is often considered a safe haven during turbulent times, failed to live up to these expectations by registering a price decline of 4.7% over the quarter, and -8.1% over the last year.

Your fund performed very poorly against this backdrop. Over the quarter the fund lost 19.0% of its value, underperforming the benchmark by 9.6% on an after fees basis. This disappointing outcome is the result of poor performances delivered by certain stocks during the three-month period as well as a high allocation to emerging markets. The fund has now underperformed its benchmark since inception (1 March 2015) by 9.8%, all of which materialising over the last three months.

Stock performance within our developed market holdings was dominated by one of our bigger holdings, Porsche, which we discuss in more detail at the end of this report. This holding alone cost the fund 1.7% in relative performance, and over 2.2% in terms of absolute capital loss. Unfortunately this incident also casts a shadow of doubt over other auto manufacturers, and Tata Motors (one of the fund's largest holdings) sold off significantly in sympathy. This is despite official denials by top management that the group does not have any exposure to this practice, and in fact, has very little diesel exposure overall. Tata cost the fund another 1.4% in relative terms and 1.75% in absolute terms.

In addition, our holdings in the alternative asset manager space in the US sold off as the industry's rate of taxation caught the attention of some high profile US Presidential candidates. Noises about an increase in the effective tax rate for the private equity industry have unsettled investors, and share prices responded in sympathy. Our holdings contributed just under 2.5% in negative relative performance. These stocks are continuing to raise record amounts of new capital, and we hold the view that market volatility is good for them, as it allows these managers to make investments at attractive prices. In the meantime however, investors are focusing on the anticipated poor third-quarter numbers that will be reported by these companies. We are confident that the long-term prospects for our holdings remain strong, and have added to our exposure into the weakness.

In total our developed market stocks underperformed by 5% over the quarter and by just under 3% since inception; almost all of which can be explained by the poor performance of Porsche. Despite Porsche and our alternative asset manager holdings, the rest of the developed market portfolio has actually outperformed the developed market benchmark since inception - an indicator that gives us comfort that our process is working. Unfortunately our global emerging market (GEM) holdings have performed very disappointingly, underperforming the GEM carve-out of the benchmark by a wide margin. When considering our holdings on an individual basis, each of them are performing well operationally; growing profits in tough economic conditions (all of our Brazilian holdings); or investing heavily in anticipation of future growth (our Chinese holdings). The only holdings where operational performance has been below par are our Macau gaming stocks, where our investment thesis focuses on an increase in capacity over the next few years. Unfortunately, in the short term, all emerging market stocks are being tarnished with the same macro-economic brush, and have been punished by nervous investors. We continue to hold these stocks as we believe in their longer-term prospects.

Given the volatile quarter, the portfolio has not changed materially over the past three months. We have added to our Porsche position (given the severe market reaction), as well as to some of our emerging market holdings. We have added to Blackstone as the pre-eminent alternative manager, and have sold out of some of our smaller holdings. Most of the top 10 holdings have remained the same over the quarter. We remain convinced that our research process, which focuses on identifying long-term value in listed stocks, is robust and will deliver value to our clients over the long term. We also see significant value in most of our holdings, and as such remain confident that the fund will deliver good absolute and relative performance over the medium to longer term.

Given the period of turmoil for Porsche/Volkswagen, we thought it appropriate to discuss the recent developments and the potential impact on the longerterm prospects for the groups. In September, VW admitted to deceiving the United States' Environmental Protection Agency's tests with respect to emissions of certain gases from their diesel engines sold in that country. The true emissions were significantly higher than what tests showed, because the company made their vehicles behave differently during the test phase compared to on the road. This is a serious infraction with a maximum fine initially thought to amount to $18bn. In the immediate aftermath, VW's market value fell by a similar amount even though this was subsequently shown to be overstated (the revised maximum fine was estimated to be $7.4bn). The company thereafter announced a provision of €6.5bn and the share fell further on concerns of contagion of the issue to Europe, bringing the loss in market capitalisation since the announcement to as much as €30bn at one point. We believe the likelihood of fines, recall costs and customer compensation of this magnitude are fairly low, given historical precedent of similar matters and our discussion with experts in the automotive and regulatory environment.

However, it is not possible to know with certainty what the final cost to VW will be for this event, nor can we be certain that there are no other issues in the company that may subsequently come to light. We are, however, able to look at various scenarios of probable costs and assess how these impact the long-term investment case of VW (and hence Porsche). Prior to the revelations, VW was one of the most attractive stocks in our investment universe, based primarily on our belief of long-term margin expansion thanks to scale and the implementation of MQB (a platform for producing multiple vehicle types on a shared platform, reducing costs significantly for a multi-brand operator). In our view, while these events are material (and not forecastable given VW's previous reputation for excellence), they have impacted the fair value of the business by far less than the reaction of the share price thus far. Fines paid and costs incurred will be paid over many years and in most cases will be tax deductible, reducing the impact on the valuation of the business even further. VW has adequate cash resources and generates reasonable cash every year from its manufacturing arm, and thus we believe it is unlikely that an equity raise will be required.

Portfolio managers
Louis Stassen and Neil Padoa

Please note that the commentary is for the US dollar fund. The feeder fund is 100% invested in the underlying US dollar fund. However, given small valuation, trading and translation differences for the two funds, investors should expect differences in returns in the short term. Over the long term, we aim to achieve the same outcome in US dollar terms for both funds.

During a relatively uneventful quarter, global equity markets returned a marginal positive return of 0.5% over the period. Global fixed interest markets continued their painful adjustment to normal interest rates and generated negative returns, with widening credit spreads contributing to investors' pain. Listed global property shared the negative impact of moves in interest rate expectations, and most developed market indices were severely impacted; in Europe's case the index return was negative 11.1%. That said, the subdued nature of markets changed significantly during the last week of June due to the negotiations in Greece reaching a climax. Fears of a Grexit gripped European equity markets, and while at the time of writing it is virtually impossible to predict the outcome, markets have retraced most of their losses. The implications of any outcome will take time to be digested by markets given how fluid the situation currently is.

While US growth prospects have softened during the first half of this year, the likelihood that the Federal Reserve (Fed) will start to raise rates later this year has diminished only slightly. This is partly because the demand side of the economy (most importantly consumer spending) appears to be getting back on track following the winter season lull, as illustrated by retail sales and auto purchases which picked up again recently. Housing activity has rebounded as well.

One clear consequence of low interest rates in developed economies, coupled with CEO confidence in the future of global markets, is that mergers and acquisitions (M&A) activity has skyrocketed. This is due to solid global growth and cheap, abundant money - both of which have acted as a catalyst for sustaining these activities. For the first five months of 2015, US M&A targeted (involving companies with a market capitalisation of $10 billion+) has more than doubled compared with the same period last year, thereby reaching the highest level ever. Interestingly, US acquisitions into Europe, Middle East and Africa year to date are also the highest on record. And while the US is the most active cross-border acquirer, it is not the only one. Global cross-border M&A volume is up 49% year-on-year to reach the second highest level ever.

As always, stepping-back and gathering a longer-term perspective on international investment markets is helpful. As a starting point, investors should not lose sight of (amongst many others) the following facts:
-2015 marks the ninth year in which there has been no rate hike by the Fed;
-52% of all government bonds around the world yield less than 1%; but
-four countries (US, UK, Japan and Germany) are now operating close to estimates of full employment and in each case, wage inflation appears to have picked up.

Our concern is twofold. On the one hand, many investors around the world have grown accustomed to, and reliant on, the current status quo. That is, after 9 years of generational-low interest rates, they have come to regard this as embedded for the longer term. On the other hand, we believe that this benign period is in the process of changing. Overall, neither investment markets nor the Fed believes that inflation will be a problem. But the risks, in our view, are that we are underestimating the amount of inflation in the pipeline. If we are right, this will clearly have negative implications for emerging markets, as capital outflows could drive asset prices lower and currencies weaker against the dollar. These are the macro issues. One positive outcome for global equity investors is that an increasing number of high-quality emerging market equities are on offer at very attractive prices.

Your fund matched the benchmark MSCI All Country World Index (ACWI) over the quarter after all fees, resulting in a marginal outperformance of the benchmark since inception five months ago. However, as we will continue to highlight during the early years of this product's existence, evaluating fund performance over anything less than 3 - 5 years is meaningless. The absolute return of 4.9% net since inception should nevertheless warm early investors' hearts! Positive contributors since inception include Amazon, TripAdvisor, Japan Tobacco and the fund's Russian stocks. Detractors are dominated by the poor performance of Tata Motors (the fund's largest position at the moment), where the market's concern about the sustainability of margins in China, is overshadowing other pieces of positive development such as new model launches. SJM and MGM China suffered from negative news flow regarding the Macau gaming industry, both in terms of number of visitors and gross gaming revenue.

We continue to find value in many of the technology names that your fund already owns. Amazon and Google have both featured in the fund's top 10 holdings since inception, and we have high conviction that these stocks offer superior risk-adjusted return prospects over the longer term. Two new technology holdings introduced during the month of June were Apple and Priceline.

Apple continues to strengthen its ecosystem with initiatives around ApplePay and its music streaming service. While it generates the bulk of its profits from the iPhone business, it is rated by the market on a very attractive 9% free cash flow yield. Its commitment to sound capital allocation steps is also commendable, making the company more attractive in the longer term.

Priceline owns Booking.com, the premier online hotel booking service. The growth prospects for this business remain attractive in our opinion, and yet we do not believe we are paying a premium for this growth. In addition, its cash-generating capabilities are underestimated and the board's commitment to sound capital allocation reduces the risk inherent in a technology-based business. We also own TripAdvisor in this space, a more highly-rated competitor with more potential growth opportunities than those of Booking.com.

Our emerging market exposure has disappointed so far, but given the low valuations of many of these stocks, we continue to believe that the fund will benefit over time from these holdings. Brazil, in particular, offers significant upside despite the poor macroeconomic outlook.

Portfolio managers Louis Stassen and Neil Padoa

The fund aims to produce long term out-performance of global equity markets as measured by the MSCI Daily Total Return ACWI USD Index, primarily through exposure to equities and equity related securities in global markets.