Aberdeen Life Pension Converter
Objective
To maintain the annuity purchasing power of investors’ accumulated pension savings against changes in the cost of annuities.
Manager's Quarterly Report
July 2010
Market review
- News flow in the UK was dominated by the General Election and ongoing concerns about
Euro area debt problems. The Bank of England left the base rate unchanged at 0.5% during the
quarter and maintained the asset purchase target at £200bn. However, the minutes from the
meeting in June highlighted the first split in voting since February 2009, with Andrew Sentance
dissenting in favour of a 0.25% increase, based on a combination of inflation resilience in the
UK and signs of global recovery.
Long dated sterling credit underperformed government bonds, with spreads widening by
0.27% to end the quarter at 1.61% over gilts, despite companies generally reporting improved
performance. Sovereign debt concerns overshadowed credit fundamentals causing a drag on
performance.
Fund review
- The fund underperformed over the quarter. Security selection within credit detracted value. We
remain overweight credit risk, specifically in sub-ordinated financials, but trimmed down our
financial holdings. Within interest rates, a short duration position and a yield curve flattening
position both detracted value.