A generally positive quarter for risk assets was marred on the last day of trading by the ongoing failure of US politicians to agree on the latest round of budgetary spending. Predictably, this helped to support bonds and gold which had otherwise had a fairly dismal quarter as investors continued to rotate into equities as economic data continued to please on the upside.

Nonetheless, the pattern remains reasonably positive for major equity markets. Economic growth is accelerating gently and companies are benefitting from this trend. The unexpected delay to the Federal Reserve's plans to taper Quantitative Easing, however, underlined the fragility of the recovery in the US where unemployment remains stubbornly high and corporate profits are too often being supported by cost cutting rather than genuine top line growth.

Another area of concern has been the lacklustre performance of emerging markets. This has been going on for some time now, but the latest bout of currency weakness has magnified the losses in hard currency terms and the selling pressure is hardly abating. Nevertheless, there is a growing consensus that concerns are overdone and profit margins in emerging markets remain at a premium to more domestically focused western companies. The Fund does not invest directly into emerging markets but the vast majority of its underlying companies have a significant interest in the region. As a consequence, any slowdown in top line growth for major markets should be offset by an improvement in emerging market sales as, all things being equal, minor markets start to benefit from the growth seen elsewhere.

The First World Equity Fund fell by 1.5% in sterling terms during June. This performance reflected a weak month for global equity markets whilst a number of other asset classes, notably government bonds, lost ground. Global equities fell by 3% in June. Once again, emerging markets were relative laggards, falling by 6.9% in sterling terms over the same period.

The Fund remained in line with its yield benchmark throughout the period, ending the month with a gross yield of 3.2% similar to the 3.2% composite benchmark drawn from the FTSE350, FTSEurofirst and S&P500 Indices. To a greater extent, this narrowing of the yield gap between fund and benchmark was due to the higher levels of cash which we held in the portfolio during the month. We expect to invest these funds into the market as the third quarter progresses and equities start to show signs of stability.

Global equities weakened during the month as US Treasury yields rose on worries that the Federal Reserve Bank was considering tapering off its programme of Quantitative Easing, buying bonds in exchange for improved liquidity in the banking system. By the end of June, US 10 year Treasury yields had risen to 2.5% from a low point of 1.6% just a few weeks earlier. This led to a sell off across the investable universe, from bonds to equities, commodities and even gold as investors reined in borrowing in anticipation of higher interest rates and shifted into short-term risk free assets (cash).

Whilst the rise in bond yields has been quite sudden, we have long argued that government bond markets appeared to be distorted and that a yield of less than 2% was effectively locking in a loss in real terms, after stripping out the impact of inflation. Bond markets have been driven higher in part by the Quantitative Easing process and technically it makes sense for prices to reverse if this process is coming to an end.

After a strong few months for equity markets, some consolidation is likely at current levels whilst the market digests the latest raft of economic data and analysts begin to sharpen their pencils in anticipation of the second quarter earnings figures due out in July and August. These will give a better indication as to whether the recovery is filtering through to companies in the form of better profits and higher margins. With income still high on many investors' agenda, we still expect support for the strong dividend paying companies in the Fund, notwithstanding that valuations in a number of instances no longer offer the value they did in 2012.

The First World Equity Feeder Fund gained 15.8% in sterling terms during the first quarter of 2013. This performance reflected a generally strong period for global equity markets whilst a number of other asset classes, notably government bonds, lost ground. Performance was distorted to some extent by currency movements, in particular, the strength of the US Dollar which gained nearly 7% against sterling since the start of the year flattering returns from internationally diversified portfolios measured in sterling but having the opposite effect on dollar denominated accounts. Global equities rose by 14% during the quarter led by the US and Japan. Once again, emerging markets were relative laggards gaining just 4.8% in sterling terms over the same period.

The Fund remained consistently above its yield benchmark throughout the period, ending the quarter with a gross yield of 3.3%, ahead of the 3.0% composite benchmark drawn from the FTSE350, FTSEurofirst and S&P500 Indices.

The strength of the equity market was at odds with the disappointing economic news from the UK and, in particular, the Eurozone. China, too, is struggling to make the transformation from a rapidly growing emerging market to a world superpower, a problem reflected in the relatively disappointing returns from Asia during the quarter.

On the other hand, the US economy continues to gain momentum. Whilst the pace of growth is subdued by historic standards, it is growth nonetheless and much of the stockmarket's recent strength has been based on the assumption that US growth will eventually lead to a global recovery. Certainly, despite the problems in Cyprus, the Eurozone crisis feels very much like yesterday's story even if the core problems still remain.

Japanese equities enjoyed a stellar quarter, however, even after allowing for the sharp depreciation in the value of the Yen. In a concerted attempt to stimulate the lacklustre Japanese economy, the newly elected central bank Governor, with the support of newly elected Prime Minister Shinzo Abe, has embarked upon a course of aggressive quantitative easing. This policy has flooded the market with liquidity and driven Japanese equities higher (and the Yen lower). Shock economic tactics of this nature depend upon economic recovery arriving sooner rather than later and we are not convinced. Japan remains one of the highest indebted nations in the world and has been on a downwards spiral since the late 1980s.