Fund manager commentary
Having experienced very strong performance during 2013, the FTSE All-Share Index fell back 3.1% during January.
There were two main reasons for this. First, trading results from a number of companies were fairly poor. Companies as diverse as Tesco, Royal Dutch Shell, Pearson, Serco and Premier Farnell all gave weak updates, and in some instances this led to the share prices falling sharply. The second reason was more related to macro-economics as some emerging markets experienced turmoil which was then translated to weakness for more developed markets. The tapering of the US Fed’s bond purchases has led to a withdrawal of capital from higher risk emerging markets, such as Argentina, Turkey and South Africa, causing those countries to experience falling exchange rates and rising interest rates.
Although many companies found trading difficult, economic statistics in the UK have continued to progress. The preliminary estimate of GDP for the fourth quarter of 2013 was 0.7% quarter on quarter, giving an increase of GDP of 1.9% for the year. The IMF increased its forecast for UK economic growth to 2.4% for 2014 and to 2.2% for 2015. Inflation fell further, with the CPI falling to 2.0%, in line with the official Bank of England objective, for the first time in 4 years. Unemployment fell to 7.1%, which is very close to the point at which the Governor of the Bank has talked of starting to normalise interest rates. However, while inflation is close to target levels, there is little immediate impetus for the Bank of England to act.
As at 31 January 2014
The value of shares and the income from them is not guaranteed and can fall as well as rise due to stock market movements. Past performance is not a guide to future performance. When you sell your shares, you might get back less than you originally invested. If markets fall, gearing can magnify the negative impact on performance. Changes in rates of exchange may have an adverse effect on the value, price or income of investments. Emerging Markets, Unquoted Companies and Smaller companies carry a higher degree of risk and their value can be more sensitive to market movement; their shares may be less liquid and performance may be more volatile. The fund may invest in hedge funds or private equity funds which are not normally available to individual investors, exposing the fund to the performance, liquidity and valuation issues of these funds. Such funds typically have high minimum investment levels and may restrict or suspend redemptions or repayment to investors. The asset value of these shares and its prospects may be more difficult to assess.