The fund returned 2.73% (1.05% over the STEFI Composite benchmark) for the quarter ending September 2010 and 7.51% for the year-to-date. As at the end of August 2010 (the latest available CPI data point), the fund achieved a real return of 4.05%. The fund continues to be cautiously positioned in a market characterised by a deluge of US Federal Reserve-generated global liquidity and would prefer not to chase already advanced asset prices. Volatility as at the September '10 close was in the lower decile of its range, indicating fewer trading opportunities. Nonetheless, better opportunities are expected in the last quarter of 2010.

The fund returned 2.14% for the quarter ending June 2010, that being 0.41% over the STEFI Composite benchmark and a real return of 0.96% for the equivalent period. Currency, credit and equity derivative strategies are the main contributions to this performance. Changes in the fund from the previous quarterly report include the expansion of the short-term equity derivative strategy to 18.9% as value opportunities have presented. Market sentiment remains tentative and polarised between inflationary and deflationary protagonists. The fund therefore retains its bias toward short-term value transactions.

The fund returned 0.87% for the month of March taking the effective return for the year to 2.45%. The March performance takes the fund to 0.26% ahead of the STEFI composite benchmark for the month and 0.67% ahead of the benchmark for the calendar year. The return was generated by short-term bond transactions, credit and currency rotation exposures.
Value opportunities have been fewer in this low volatility (risky asset supportive) market environment. Foreign Mutual Fund inflows into emerging markets have, on the margin, continued to feed the bullish sentiment prevailing despite lingering concerns of overheated equity and emerging market bond prices. The power of 'zero' (or close to zero) short-term lending rates in developed economies and the search for yield has pushed risky asset prices into overdone territory on a risk-adjusted basis and I view it as unwise to add further risk to the portfolio at this stage.
Consequently I expect significantly better opportunities as we move towards mid 2010.

The fund performed inline with my expectations over the calendar year, returning 16.2% and 7.1% over the STEFI Composite benchmark for the period. Performance was largely generated in the first three quarters of the year with last quarter presenting fewer opportunities. Despite this, the fund exceeded the benchmark with a 1.90% return over that of the benchmark at 1.83% for the quarter.