The equity market showed some signs of life in the third quarter with returns on the market as measured by the shareholder weighted index - SWIX of 7.9%, -1% and 4.9% for July, August and September respectively. The Dynamic Return fund returned 3.8%, -0.1% and 2.7% for the corresponding periods. The fund remains conservatively positioned. The fund aims to minimise the impact of negative market movements and this has been achieved successfully this quarter.

Looking Ahead
While recent fund performance versus both benchmark and peers is encouraging, we continue to make the point that fund performance is to an extent dependant on the continued performance of growth assets themselves. The market is expected to rise on the back on so-called Quantitative Easing 2 in the USA. We remain worried about exogenous event risks that pose a threat to growth expectations and retain our cautious positioning with a view of volatility increasing as a result of continuing macro-economic uncertainty.

Fund Review
The fund returned of 16.1 % for year ended 2009, outperforming our targeted benchmark (Inflation + 6%) by over 4%. The main reason for our outperformance was our more bullish stance on equities, which had an exceptional year, returning over 32%. The fund maintained between 50% - 60% equity exposure throughout the year (before protection).

Looking Ahead
The fund is currently conservatively positioned should the market pull-back but would participate in potential up-moves as illustrated below:
Market -20.0% -10.0% 10.0% 20.0%
Fund -6.6% -4.2% 5.3% 10.3%
We remain cautious on the overall positioning of the fund given the stellar performance of equities in 2009. We believe a correction in the short term would prove healthy. However, on a longer-term view we favour equities to outperform.