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The Fund had a very good quarter on the back of a significant EM rally. Our 60% positioning in Emerging Markets paid off handsomely as it gained 12% during summer.

With BREXIT being brushed aside, we have witnessed a strong risk on appetite. Yield hungry investors moved on from US and Europe into Emerging and Frontier Markets alike, as valuations and growth concerns weighed on the developed economies. Indeed, the 3rd quarter was purely a risk-on play with the VIX index (a popular measure of the implied volatility of S&P 500 index options) touching a 2-year low at 11.3. Recovery in oil prices helped sentiment; whilst the price touched a temporary low of $42 per barrel of oil in August on supply concerns, the recovery was swift and strong, closing the quarter at over $50 per barrel.

The market seems to have thrown in the towel with regards to trying to understand the path the Fed will take on rising rates. The US has come out numerous times saying that it is data-dependent, but seems to be consistently pushing back on taking a stance on raising rates. A year ago, we were discussing a 100bps increase over 2016, but now, one year later, with the politically sensitive US elections round the corner, the only possible rate hike might be taken in December. This uncertainty doesn’t help markets, and we are seeing signs of nervousness in this regard.

Our allocation hasn’t changed much over the course of the year, with an overweight positioning in EM. We expect this to continue for the last three months of 2016.

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