Ian Heslop, Old Mutual Global Equity Absolute Return Fund

Performance against market conditions
• Fund saw strong results in first half of year
• Performance has continued throughout the second half of year despite volatile markets
• Fund is generally uncorrelated to equity markets
• Volatility profile remains in line with expectations

Opportunities still exist amid volatility
• Global Equity Absolute Return Strategy is designed to perform in all market conditions
• It is important to capture changing investor sentiment within portfolio
• European situation is grave but opportunities to make money do exist
• Despite globalisation, markets are not the same and they do react differently to different stimuli

Japan as an example
• Outlook for Japan has moved into positive territory post-tsunami quite quickly
• It had suffered its ‘lost decade’ – deflation, excess debt, excessive property boom
• Japan has decoupled from Western markets leading to outperformance of value stocks

Macro outlook – focus on Europe
• High volatility will continue for the next six months on a global scale
• Europe’s debt problems will continue to plague all equity markets
• Even if Greek problem is resolved, those of Italy, Spain, Ireland etc will remain
• Flexible portfolio construction is essential to navigate markets

Portfolio construction over summer and beyond
• Consumer staples is a key sector that has been driving performance eg Swedish Match, Nu Skin
• Outperformance has been driven by early defensive positioning in blue chips
• During the summer derisked the portfolio – which was correct
• Has been buying some cheaper stocks but largely those with a defensive bias
• Believes uncertainty in equity markets will continue and investor sentiment will remain cautious

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