The Stewardship Fund is an international equity fund which aims to achieve growth through investing only in companies which meet certain ethical criteria. As an equity fund this fund has a potentially high return but also a very high risk profile given the risks inherent in inverting in equities. The fund can be volatile over short to medium term periods.

Market Review:

The MSCI ACWI NDR (EUR terms) gained 4.8% in euro terms. Global equities rallied strongly over the quarter, supported by positive corporate earnings and generally robust global economic growth. US equities outperformed as the domestic economy continued to strengthen. Technology was a bright spot within the US market, with Apple becoming the first stock in history to reach a market capitalisation of over $1tn. In line with market forecasts, the Federal Reserve raised its funds rate by 0.25% to 2.25% after its September meeting. Eurozone growth was far more restrained, while the region's equities were held back by worries over Italy's debt levels and spending plans. There were also concerns over eurozone banks' exposures to Turkey, given further dramatic falls in the lira. Asia Pacific equities trailed the global average, hit by further escalation in the trade dispute between the US and China. Performance:

The fund outperformed the benchmark over the quarter, driven by positive stock selection. Among the top individual contributors to performance was water technology solutions provider Xylem, which was buoyed by strong quarterly results and growing orders. Semiconductor maker Taiwan Semiconductor Manufacturing Company outperformed as it gained market share in key chip segments and as overall demand for smartphone handsets improved. US retailer Tractor Supply Company was boosted by strong operational performance. Shares in A. O. Smith declined as sentiment was hit by the escalating trade dispute between the US and China. Among the other detractors were auto parts companies Continental and Aptiv, as investors fretted over production halts from emissions testing bottlenecks. In terms of sector allocation, the overweight in technology sector was positive, while the overweight in auto components and the zero exposure to pharmaceuticals weighed. Outlook:

At current valuation levels, markets remain vulnerable to unexpected surprises. Trade wars, emerging market challenges, and rising bond yields are among the main risks that could take markets lower. Overall, we continue to be constructive towards equities, with our stance driven by improving corporate profitability and healthy mergers & acquisitions activity. Our portfolio positioning retains a bias towards higher quality, sustainable growth companies that can prosper in spite of any near-term economic and policy-driven volatility. Where valuations have begun to look elevated, we are continuing to take the opportunity to reduce some of the fund's exposure, reinvesting into stocks that are either more defensive in nature or where there appears to be better valuation support.

30th Sept 2018

1.125% pa of fund assets. Please refer to policy conditions for policy charges.