Investment FundsLibero Cautious Fund

The Cautious Fund held its own in difficult circumstances delivering a return of +0.1% for the month. The defensive stance taken in March paid off with both gilts and equities trading in a volatile and directionless manner. Overall, British Government stocks ended slightly ahead with equities down.

It was particularly interesting to see that as concern about Eurozone debt and Spain in particular increased, gilts, which represent over 50% of the portfolio attracted “safe haven” buying which was to the benefit of the Fund.

Equity volatility presented opportunities to secure profits. The holdings in Whitbread and Johnson Matthey were both sold. As a result, exposure to equities was lower than target for most of the month. It does, however, remain our view that equities are attractive both in terms of potential capital appreciation and income. Towards the end of April, a number of the existing holdings were increased to return the equity weighting to 25%.

As evidence of economic growth accumulated during the first few months of the year, central banks on both sides of the Atlantic indicated that financial markets should not expect further monetary help. However, in recent weeks the news flow has deteriorated, particularly in Europe. If it becomes clear that economic growth in the UK is likely to remain anaemic and that inflation remains on a declining trend, then the Monetary Policy Committee has the mandate and the capacity to provide further help. The Cautious Fund is well placed to benefit in this environment. An increase inequity exposure beyond the current level remains our medium term plan, but in the short-term, there are few compelling reasons to alter the current balance.