Welcome to our February update, reviewing the performance of the markets, our suggested portfolio’s and keeping you informed of progress.

We would also like to take this opportunity to introduce you to our new website - please take a minute or two to visit the website, which provides further information on the portfolio’s and our services. Remember we are just a phone call away if you need anything further.

January was a disappointing month for global equities as the FTSE 100 fell by 4.2% and even larger losses were experienced in European and Asian markets. This was because of a combination of factors but most notably, China sought to tighten its monetary policy in an attempt to reign in economic growth and to reduce potential inflationary pressure. This spooked many investors, who currently believe that China’s growth is fundamental in this new economic landscape.

Another important factor was Obama’s proposed changes to banking regulations and the introduction of a tax on large financial institutions. The announcement of these measures sent financial based equities into a tail spin as this tax will undoubtedly reduce the profitability of the sector. Conversely, the introduction of these new rules could reduce risk associated with the banking sector and prevent the reckless trading that started this “great recession”.

The UK finally managed to exit the recession during the last quarter; however it was at a snail’s pace of 0.1% and that is being unfair to the snail. This left many economists to propose that the UK is going to have a long and painful recovery, suggesting that equity levels will remain flat during the early part of 2010. However, this isn’t necessarily true; there is no doubt the UK market is facing some serious obstacles but other important factors such as retail sales, unemployment, the housing market and corporate profitability are currently performing far better than the majority of economists imagined.

As mentioned in last month’s report, we still feel that there is a large downward pressure on the Euro, with member states like Greece, Spain and Ireland having some severe sovereign debt issues. It is unlikely that any of these countries in reality will actually default on their debt, as the European Central Bank and the stronger member states (France and Germany) will do anything within their power to protect the European single currency. The devaluation of the Euro might actually work in the favour of the Euro-zone, as the relative strength of the Euro has had negative impact on exports.

After January alternations to both the cautious and balanced portfolios, we feel confident that 2010 will be another successful year.

Having recommended both fixed interest and property holdings in our Cautious and Balanced portfolios, the impact of the losses in the stockmarket were marginal. However, the Adventure portfolio, investing wholly in equities, was hit the hardest down almost 3.6%.

Our Absolute Portfolio, as you would expect, was extremely resilient to the volatility in the markets and produced a healthy and positive result of 0.25% for the month.

The underlying managers in our most popular strategy, the Cautious Portfolio, produced exceptional results during the month. It was pleasing to see that our patience with the Octopus Fund, which has struggled during the latter part of 2009, had paid off, with a return for the month of 2.53%.The stockmarket holdings in the portfolio suffered, as you would expect, Neptune and Premier both down by circa 5%. Overall the portfolio, held its own with a break-even result.

The Balanced portfolio was down by around 1.5% for the month, demonstrating that a diverse collection of investments can be defensive even when nearly 60% of the portfolio is held within stockmarket investments.

Absolute Return

Absolute Returns We started testing our Absolute Portfolio from the beginning of last year. The portfolio is designed for investors looking for a low risk environment but wanting to improve the results associated to bank or building society deposit rates. Since March almost every investment class has improved, therefore making it impossible to evidence the secure nature of this portfolio.

During January however, with global stockmarkets being hit hard, it was clear to see that this portfolio really could deliver. The performance of just 0.25% for the month may look unimpressive, but consider that the FTSE100 lost over 4% during January. Taking into account that the current investments when combined, produced over 8% last year, this portfolio clearly has a case to replace deposit account savings.

If you are interested please give your normal adviser a call or take a more thorough look at the Absolute Portfolio on our Website