Fund manager commentary
British Assets Trust NAV Total Return was 5.4%, outperforming the increase of 4.4% for the composite benchmark index – which is 80% FTSE All Share/20% FTSE World ex UK. The FTSE All Share rose by 4.3% and the FTSE World ex UK by 4.9%.
This ended up being an excellent month for equity markets as investors reacted positively to the temporary solution for the US debt ceiling discussions and early third quarter earnings data whilst overall disappointing was not the disaster some had feared. Most major developed market indices performed well with the exception of Japan where there has been disappointment the follow on reforms from the initial stimulus have been slower in enactment. With this background unsurprisingly credit markets, whilst generating positive returns, could not keep up.
There was however a different leadership to returns this month as the oil sector, which has been very weak, recovered somewhat. It was boosted by BP's commitment to return further cash to shareholders as a result of continued capital discipline and an increase in the planned rate of disposals. Royal Dutch Shell continues to take a different path however and actually increased their estimate of 2013 capital expenditure – leading to the shares reacting very differently.
Banks were buffeted by disappointing third quarter capital markets revenues, the quantum of the fine paid by JP Morgan to settle legacy mortgage market related issues, a new investigation into alleged misdemeanours in the foreign exchange markets and what appears to be a further shifting of the regulatory goalposts as regards capital requirements. After a strong period of performance these shares are due a pause for breath. Financials overall however contributed positively as the life assurance sector in particular was very strong.
As at 31 October 2013
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