The Fund currently has active positions in three asset classes that are at, or close to, all-time highs. These active positions have come as a result of research performed on the underlying asset classes in conjunction with portfolio construction considerations.

Firstly, the weighting to local equities is at an all-time low (over the Fund's 40 month history), and is currently 35.1% of the Fund. The allocation to equities is nearly 15% below benchmark as a result of the extremely high rating that the local market is trading at (PE in excess of 18). The allocation isn't lower only because the equity portfolio in the Fund is priced at a discount to the market (PE of 16.4).

The second major asset allocation decision is the local property overweight position. The Fund has an allocation of 16.4% in local property, which is the highest it's been since launch. The position is predominantly a function of the relatively high starting yield when compared to bonds and equities. While we recognise the risks associated with this asset class in the event of rising interest rates, the significant underweight to bonds (near all-time lows) more than compensates in the case of rising yields.

The bond underweight is the third large active position and is a result of historically low yields. While there is scope for strength in the short to medium term, we prefer to take duration exposure in the Fund through our property allocation.

The Seed Flexible Fund has delivered a return of CPI + 8.8% per annum since launch.