We have been made aware that the F&C Strategic Corporate Bond fund has changed its investment objective.

There are two elements which the change in objective is looking to address. Firstly, the previous objective stated that "the fund aims to produce a high income by investing in corporate bonds and other fixed interest securities". In the revised objective the aim is to now "deliver a return through a combination of income and growth." The revision is more in line with other strategic bond funds within the sector. It also reflects that conditions within fixed income markets, which now and moving forward are likely to require greater management of capital rather than simply income generation.

The second key change relates to the use of derivatives. Previously, derivative use was only permissible for efficient portfolio management purposes. In the revised objective it is now possible for them to be used "for investment purposes to hedge investment risk, replicate investment positions and generate additional return in a risk controlled manner." The ability to use derivatives for investment purposes will provide the manager the ability to profit from falls in markets. It will also mean that they are able to take synthetic long positions in the market, rather than physical. This has proven an important way to gain exposure in times when markets are illiquid, both to enter and exit positions.

Both changes to the objective of the fund are moves which we are comfortable with, both to provide the managers with greater flexibility and in light of conditions within fixed income markets. We will continue to monitor performance of the fund to ensure that the change in mandate do not have a detrimental effect on performance moving forward.