The fund delivered a 0.5% return for the month, bringing the return for the quarter since launch to 2.5%. Our exposure to banks and gold shares did not pay off, even though we enjoyed strong performance from MTN and Naspers.

We still remain nearly fully hedged in the equity component of the fund, with only a 10% net equity weighting, and more importantly, a very low overall fund market sensitivity. What this means is if the market were to move down by 10%, we would only lose 0.3%, but given the high case base return, the fund will still do around the return on cash, plus our ability to pick relative stocks. Our overall fund volatility is only 3%, considerably less than both bonds (9%) and equities (20%).

As can be seen, we are unsure as to what will move the global markets lower, but we do know that market indices are living on borrowed time. Either economic activity, and by implication corporate profits accelerate substantially above 5.5% real economic growth and 60% profits growth in the US, or markets will head lower. The third possible outcome is the US dollar taking up all the slack painlessly. We don't think this is feasible.

The fund should continue to appeal to clients requiring low risk returns, ahead of cash and inflation. As interest rates decline further, the fund will become more attractive.