For the first time in quite a while markets lacked clear direction in June, producing more subdued gains and losses compared to the previous couple of months. After eleven weeks of strong growth in equity markets it seems as though they paused to take a breath during the last number of weeks. Volatility in equity markets has slowly, but surely, made it's way back to levels last seen prior to the collapse of Lehman Brothers in September last year. Economic news remains mixed, and commentators are far from agreement on when the recessions around the world will end, and more importantly to what growth rate global economies will return.

Around the world equity indices had mixed returns (when measured in local currency terms) in June. In the United States (S&P500 up 1.0%) and in Japan (Topix up 3.5%) markets ended the month in the green, but the European indices (including the United Kingdom) gave back a little of the previous months' gains. Global developed market equities held up slightly better than its emerging markets counterparts with the MSCI World Index losing 0.5% against the MSCI World Emerging Markets Index giving up 1.3%. From the onset of the market recovery early in March emerging markets have outperformed developed markets by more than 15%, so a somewhat weaker performance on the way down is not surprising. Two other asset classes that have delivered equity like performance during this recovery period have been US high yield bonds, and global property securities. Both have managed to perform better than the MSCI World Index, with high yield bonds doing so with a lot less volatility. Within developed and emerging market equities, high yield bonds managed to keep on rewarding its investors with positive returns during June (as can be seen on the graph overleaf).

Whilst volatility in equities reduced throughout the month this was not the case with government bonds. The yield on the US 10 Year treasury started the month at 3.46% spiking to 3.95% mid-month and then back to 3.53% on 30 June. US treasuries ended up losing around 0.2% for the month, with government bonds in the UK, Eurozone and Japan ending up around 1% higher in local currency terms. Investment grade corporate bonds continued their strong showing over the last couple of months with this asset class gaining more than 2% in the US, UK and Europe during June. As mentioned on the previous page high yield bonds continued to reward its investors with solid returns, with the US version now up over 30% for the year, and in Europe delivered nearly 40% in euros since 31 December 2008. Global convertible bonds outperformed both global government bonds and global equities, by posting 0.8% for the month and a little over 18% for the year to date.

Property security indices also treaded water for the second month running, in spite of US housing starts for both May and June surprising on the upside. In the United States, United Kingdom and Europe the real estate investment trusts (REITs) indices were broadly lower during June, with Asia bucking the trend by ending 3.3% higher. The recovery in Asian property securities in 2009 is now around 25%, showing a clean pair of heals to the developed markets of the United States (-13.4% YTD), United Kingdom (-16.3%) and Europe (+2.9%).

As was the case for almost all risky assets during June the currency market also lacked some direction. The euro, Yen and Pound Sterling were broadly neutral against the US Dollar, with emerging market currencies gaining somewhat when benchmarked against the greenback. We maintain our view that the preferred variation from a neutral currency position would be a bias towards a general basket of emerging market currencies.

After being the worst performing major asset class in 2008 oil has continued its prolific recovery with Brent Crude rising to around $70 at the end of June. Since 31 December 2008 the oil price has increased by more than 75%, but this is still more than 50% below the levels that we saw in July 2008.

Agricultural commodities (-8.5%) and gold (-4.1%) also disappointed during the month, with broad commodities up slightly by adding 0.5% (14.3% YTD).

Now that we have entered the second half of 2009 and (at least in some regions) the end of the recession is in site, all eyes would be in the expected rate and sustainability of economic recovery. It is not guaranteed that markets have been informed of all the credit crisis skeletons in the world's closets, with Europe perhaps not exposing all of its banking problems yet. Governments around the world are heavily indebted as it stands, and the capacity for further rescue packages is much reduced from one year ago. Reduced government expenditure, perhaps coupled with increased taxes, and less accessibility to credit are sure to create a drag on the global consumer's spending patterns. Moreover, without a happily spending consumer any recovery in equity markets is sure to be much more modest than what we have experienced in prior boom years. To end off it may be sensible to remember the basic principle that markets can go up and down, and from recent (and not so recent…) experience we know this can happen very quickly. So buckle up, and enjoy the ride!

FOCUS

In volatile markets like those seen over the past 12 months, it can be easy for investors to lose their nerve. No matter how obvious or extreme an opportunity seems, doubts will often creep in if prices move against you, and there are countless behavioural biases which make it difficult to act outside of the consensus. Whilst experience through severe market conditions is invaluable, and with it a keen awareness of the potential pitfalls, there are few substitutes for a clearly defined process. This process provides the investor with a framework to base their decisions on, enabling them to buy and sell with conviction and avoid being scared out at the bottom.

The process equity investors adhere to defines their ‘style', (or vice versa) and we believe there are several styles that can lead to outperformance over a market cycle, including value, momentum and quality. However, each of these styles are cyclical, and moreover, tend to be rewarded at different times. Through 2007 and the first half of 2008 momentum was dominant and value underperformed; in the fourth quarter of 2008 quality outperformed whilst momentum and value experienced significant underperformance; and then since March 2009 value has delivered its strongest outperformance in decades whilst quality and momentum both underperformed.

The RMB Global Equity Fund, managed by Viewpoint's colleagues in London, invests in managers that have clearly defined processes and have displayed the discipline to stick with their process even when they go through a period of underperformance. By combining styles that they expect to be rewarded at different times they believe this global equity strategy can deliver outperformance over a full market cycle with less volatility than the underlying styles in isolation.

Analysis of manager returns suggests that those who consistently adhere to their style and process generally produce better long term relative returns compared to managers that try to modify their processes according to market or economic conditions. The latter type of investor that attempts to time the market or the success of styles often gets the timing wrong and hence performance is generally not as good over a market cycle, with some exceptions. Those managers with a consistent style will demonstrate more volatile performance, but can rest assured that despite short term underperformance they should outperform over the long run so long as their style continues to be rewarded in markets. There are many explanations for why value or momentum styles lead to outperformance, many of them behavioural, and Viewpoint's colleagues see no reason to believe that they will stop holding true anytime soon.

Therefore style and market timing is generally not employed to a large extent within the RMB Global Equity Fund. However, we do believe that there can be instances where a strong case can be made for allocating a greater than average proportion of the fund to a particular investment style. This generally would occur at extremes of style over - or under-valuation. Recent market conditions provided such an opportunity and prompted the managers of this fund to tilt the portfolio slightly towards value managers.

This decision was based on acknowledgement that there are times when valuations reach extreme levels. We believe that the most appropriate framework for making such a judgement is based on value spreads. We calculate these spreads by ranking all of the stocks in a region by price to book - a typical measure of value - and grouping them into quintiles. We then calculate the average price to book ratio for the cheapest quintile of stocks as a percentage of the average for all stocks in the region. This measure is represented by the blue line in the chart overleaf. Over the sample period the graph shows that the cheapest quintile of stocks has fluctuated between having a price to book ratio that is between 40% and 60% of the average ratio for the universe (by definition the cheapest quintile will always have a discount to the market). Then, the two red lines represent a two standard deviation range above and below the moving average ‘cheapness' of the cheapest quintile. This provides a means for evaluating the valuation opportunity within the asset class in question.

The blue line has moved close to and beyond the two standard deviation range when the valuation opportunity reached extreme levels. This chart is no panacea for investors, but we believe it can be used to indicate when there is value in value styles.

Indeed it is important to note that this analysis is only useful for guiding the allocation to deep value managers who are operating more at the extremes. These managers will systematically recycle their portfolios so that they are holding the cheapest stocks in the universe, and hence their portfolio looks similar to the cheapest quintile of stocks in the analysis. Chart 2 compares the value spread analysis with the performance of the cheapest quintile and shows that value stocks have historically outperformed as spreads narrowed from low levels, with the aftermath of the TMT bubble being a prominent example.

Since valuations on the chart bottomed out around March this year, value stocks have outperformed dramatically. This is shown by the blue line moving sharply upwards back towards the average line, thus indicating that in global equities there is average value within the value style and there is no clear indication of whether it will outperform other styles going forward. Looking at the performance of deep value managers held within the fund, the global and US small cap deep value managers have returned 107% and 60% since early March, outperforming their benchmarks by 15% and 42% respectively.

One of the key conclusions from this analysis is that it is difficult to time the outperformance of value. It took three years for value stocks to move back to average cheapness from the low in February 2000, whereas this time around it has taken just three months! The rebound has been exceptionally fast, and many of those managers who regularly attempt to style time may have been caught out, as compared to those only doing so at extremes when the risk/reward trade off is compelling.

RECENT MANAGER MEETINGS

INDUSTRY NEWS

AETHRA ASSET MANAGEMENT
Arjan Palthe, European Equity Fund Manager
Palthe has moved to Aethra Asset Management as a European Equity Fund Manager.  He was formerly at ABN AMRO Asset Management.

Bas Verlaar, Chief Operating Officer
Verlaar has moved to Aethra Asset Management as Chief Operating Officer.  He was formerly at ABN AMRO Asset Management.

Chris Gould, Partner & Fund Manager
Gould has moved to Aethra Asset Management as Partner and Fund Manager.  He was formerly a Tactical Asset Allocation Fund Manager at AMN AMRO Asset Management.

Daan Potjer, Managing Partner & Fund Manager
Potjer has moved to Aethra Asset Management as Managing Partner and Fund Manager.  He was formerly a Tactical Asset Allocation Fund Manager at ABN AMRO Asset Management.

Ilja de Vlaam, Managing Partner
De Vlaam has moved to Aethra Asset Management as Managing Partner.  He formerly held Sales and Business Development roles at AMN AMRO Asset Management.

Khing-An Liem, European Equity Fund Manager
Liem has moved to Aethra Asset Management as a European Equity Fund Manager.  He was formerly at ABN AMRO Asset Management.

Marc Vernooji, Managing Partner & Fund Manager
Vernooji has moved to Aethra Asset Management as Managing Partner and Fund Manager.  He was formerly a Tactical Asset Allocation Fund Manager at ABN AMRO Asset Management.

AVIVA INVESTORS
Ian Berry, Fund Manager: Renewable Energy
Berry has moved to Aviva Investors as Fund Manager for infrastructure and renewable energy.  He will be responsible for the Aviva Investors European renewable energy fund, and for developing Aviva's infrastructure capability.  He was formerly an Investment Director at BlueCrest Capital Management responsible for identifying infrastructure related investment opportunities in the renewable energy sector.

BARCLAYS GLOBAL INVESTORS
Michelle Edkins, Head of European Corporate Governance
Edkins has moved to Barclays Investors as Head of Corporate Governance team.  She was formerly a Corporate Governance Director at Hermes Investment Management.

CARDANO
Bart Heenk, Client Relationships Manager: Benelux
Heenk has moved to Cardano as a Client Relationship Manager.  He will be responsible for the expansion of Cardano's activities in the Dutch market.  He was formerly at SEI Investments.  Before that he worked at Rabobank, Citigroup and Shell.

Steven Catchpole, Client Relationship Manager: UK
Catchpole has moved to Cardano as a Client Relationship Manager.  He was formerly an Investment Advisor at PricewaterhouseCoopers.

CO-OPERATIVE INVESTMENTS
Danny Fox, Credit Fund Manager: Investment Grade
Fox has moved to Co-operative Asset Management as Credit Fund Manager.  He has also been appointed as Manager of the GBP300 million Corporate Bond Income Fund.  He took over from Jamie Bebb, who stepped down managing the group's life fund.  Fox was formerly a Credit Fund Manager at Insight Investments.

JANUS CAPITAL CORPORATION
Gary Black, Ex-President & CEO
Black has left Janus Capital Group, where he was Chief Executive Officer.  His future destination is not yet known.

JUPITER ASSET MANAGEMENT
Nick Hinds, Ex-UK Head of Financial Institutions
Hinds has left Jupiter Asset Management, where he was Head of Financial Institutions.  He left the firm to pursue other opportunities.  He was formerly at Fidelity Investments.

LEGAL & GENERAL INVESTMENT MANAGEMENT
James Finch, Head of Financial Institutions
Finch has moved to Legal & General Investment Management as Head of Financial Institutions.  He will be responsible for the sale and distribution of LGIM's investment capabilities to financial institutions in the UK and overseas.  He was formerly Head of Liquidity Sales at Barclays Global Investors.

LV= ASSET MANAGEMENT
Graham Ashby, Equity Fund Manager
Ashby has moved to LV= Asset Management as an Equity Fund Manager.  He was formerly at Aberdeen Asset Management.

NEPTUNE INVESTMENT MANAGEMENT
Andrew Taylor, Private Client Sales: UK
Taylor has moved to Neptune Investment Management as a member of the Private Client Sales team in the North.  He was formerly a Regional Sales Manager at Credit Suisse Asset Management.

RIVER & MERCANTILE FUND MANAGEMENT
Ben Childs, Specialist Developer, Global Equities
Childs has moved to River & Mercantile Asset Management as a Specialist Developer in the Global Equities division.  He will be responsible for R&M's global technology infrastructure and supporting Charles Bennett, Head of Quantitative Analysis.  He was formerly at bank of America Merrill Lynch, where he held the lead analytical developer role in the yield enhancement team.

ROBECO ASSET MANAGEMENT
Jeroen van Rooij, Head of Institutional Business: Benelux
Van Rooij has moved to Robeco Asset Management and is Head of Institutional Business for the Benelux and other regions, and will have sales responsibilities in Benelux, Italy, Scandinavia and the UK.  He was formerly Head of Third-Party Distribution at ABN AMRO Asset Management.

STANDARD LIFE INVESTMENTS
Michael Geier, Investment Director: Germany & Austria
Geier has moved to Standard Life Investments as Investment Director for Germany & Austria reporting to Phil Barker, Head of European Business Development.  He was formerly Head of Third-Party Distribution at AMB AMRO Asset Management.

Simon Bouch, Institutional Sales: UK
Bouch has moved to Standard Life Investments as Investment Director for UK Institutional Business Development.  Simone was formerly an Executive Director at Morgan Stanley Investment Management.

ABERDEEN ASSET MANAGEMENT
Stephen Docherty, Head of Global Equities
Docherty has been appointed as Manager of the Credit Suisse Global Income Plus Fund.  The funds was previously managed by Graham Ashby, who left the firm.

JANUS CAPITAL CORPORATION
Tim Armour, Chief Executive Officer
Armour has been appointed as Interim Chief Executive Officer at Janus Capital Group.  He took over from Gary Black.  Tim was formerly a Senior Executive at Morningstar.

RWC PARTNERS
Mike Corcell, Hedge Fund Manager
Corcell has been appointed as Manager of the newly launched US Absolute Alpha Fund.  The fund will be focused on generating returns from both long and short positions in US equities.

SARASIN & PATNERS
Jake Ferguson, Global Property Fund Manager
Ferguson has been appointed as Manager of the Sarasin Sustainable Equity Real Estate Global fund.  The fund will select investments from an international portfolio of listed property businesses selected on the basis of their sustainable construction and environmental management.

WESTERN ASSET MANAGEMENT
Dipankar Shewaram, Head of Non-US Credit
Shewaram has been appointed as Manager of the newly launched Western Asset Global Blue Chip Bond Fund, which aims to exploit historically wide spreads, into the UK.  The fund will be invested across all sectors and countries without facing the typical restrictions that come with a traditional Global Credit Index.

Important Notes

Disclaimer:
This document does not constitute an offer or solicitation to any person in any jurisdiction in which it is not authorised or permitted, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this document, and should be satisfied in doing so that there is no breach of local legislation or regulation.  The information is intended solely for use by our clients or prospective clients, and should not be reproduced or distributed except via original recipients acting as professional intermediaries.  This document is not for distribution in the United States.

Prospective investors should inform themselves and if need be take appropriate advice regarding applicable legal, taxation and exchange control regulations in countries of their citizenship, residence or domicile which may be relevant to the acquisition, holding, transfer, redemption or disposal of any investments herein solicited.

Any opinions expressed herein are those at the date this material is issued. Data, models and other statistics are sourced from our own records, unless otherwise stated herein. We believe that the information contained is from reliable sources, but we do not guarantee the relevance, accuracy or completeness thereof.  Unless otherwise provided under UK law, Wealth management Group Ltd does not accept liability for irrelevant, inaccurate or incomplete information contained, or for the correctness of opinions expressed.

We caution that the value of investments in discretionary accounts, and the income derived, may fluctuate and it is possible that an investor may incur losses, including a loss of the principal invested.  Past performance is not generally indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments.

Our investment mandates in alternative strategies and hedge funds permit us to invest in unregulated funds that may be highly volatile.  Although alternative strategies funds will seek to follow a wide diversification policy, these funds may be subject to sudden and/or large falls in value.  The illiquid nature of the underlying funds is such that alternative strategies funds deal infrequently and require longer notice periods for redemptions.  These Investments are therefore not readily realisable. If an alternative strategies fund fails to perform, it may not be possible to realise the investment without further loss in value. These unregulated funds may engage in the short selling of securities or may use a greater degree of gearing than is permitted for regulated funds (including the ability to borrow for a leverage strategy). A relatively small price movement may result in a disproportionately large movement in the investment value. The purpose of gearing is to achieve higher returns associated with larger investment exposures, but has concomitant exposure to loss if positive performance is not achieved. Reliable information about the value of an investment in an alternative strategies fund may not be available (other than at the funds infrequent valuation points). 

Under our multi-management arrangements, we selectively appoint underlying sub-investment managers and funds to actively manage underlying asset holdings in the pursuit of achieving mandated performance objectives. Annual investment management fees are payable both to the multimanager and the manager of the underlying assets at rates contained in the offering documents of the relevant portfolios (and may involve performance fees where expressly indicated therein).

Wealth Management Group is licensed with the Hong Kong SFC for Type 9 regulated activity, Asset Management (ANM279)
Wealth Management Group PTE is registered with the Monitory Authority of Singapore (MAS) as Exempt Fund Managers
Wealth Management Group 2009