Click on the advert above to visit the company web site

Product category: Investment funds
News Release from: Gartmore | Subject: Investment
Edited by the Insidemoneytalk Editorial Team on 18 June 2007

Gartmore News In brief

Strong Demand from China Supports Industrial Metals Prices

While the global growth picture has been positive, economies in transition such as China and India are generating strong demand for industrial metals.China is short of key raw materials such as iron ore, zinc and nickel, all needed for the production of steel and steel products.While domestic production of these materials has increased, it has not been enough to supply the growth in demand China's import requirements of iron ore increased almost four fold to 325 million tonnes in 2006

According to Gartmore's China Opportunities Fund Manager Charlie Awdry, "we continue to believe that the markets are not optimistic enough on the continued tightness of the iron ore markets which will allow further price rises next year and record profit margins for producers".

Gartmore Emerging Markets Funds have benefited from owning shares in the world's largest iron ore from Brazil, Companhia Vale do Rio Doce (CVRD), whose quality assets continue to generate strong cash flows.

The Funds also hold stakes in Korea Zinc, the company which leads the industry in smelting zinc and Norilsk Nickel.

Both the Gartmore Emerging Markets Fund and the Gartmore SICAV Emerging Markets Fund have outperformed the benchmark MSCI Emerging Markets Index by more than 3% in the last year.

Market Volatility Last Thursday's rise in bond yields cast a cloud over equities, sending major markets down on the day.

The yield on the 10-year US government bonds registered its biggest one-day advance in years, above 5%.

The implications of a sustained rise in yields could be significant as some argue it could herald a sustained period of higher interest rates, which in turn would raise the cost of financing buy-out deals and eventually dampen the outlook for equity markets.

Satisfactory credit conditions have helped fuel the global buy-out boom and higher interest rates could stifle the activity and eventually lead to economic slowdown.

The markets seem to disagree and are recovering, as investors attempt to recoup the losses incurred last week.

Low valuations will continue to offer upside potential and it therefore remains difficult to envisage a marked economic downturn in the current economic climate.

Markets have proven their resilience to shocks - a drop in global markets in February 2007 following an 8.8% fall in China's benchmark as well as previous corrections in world markets in May/June 2006, November 2006 and October 2005 - and bounced back.

"Corrections provide potential buying opportunities", says Roger Guy, Manager of the Gartmore Selected Opportunities Fund and the Gartmore SICAV Continental European Fund.

"Movements such as these increase volatility and are driven by short term money hence there is no long term concern".

"Strong economic data from Europe and the US coupled with prevailing M and A activity, both real and rumoured, reinforces our bullish view of the markets and positive outlook for the Fund".

Fixed Interest With gilts under pressure and credit spreads so narrow, these are difficult times for fixed-interest investors.

However, Gartmore is showing that fundamental credit research can add value even when overall market conditions are difficult.

Karl Bergqwist and Simon Surtees, Co-Heads of Fixed Income at Gartmore, look for specific catalysts to credit spreads widening or contracting and seek to gain a profitable exposure to these events.

This strategy paid off handsomely in May, when the sub-prime mortgage lender, Kensington Group, agreed to a takeover bid from the international banking group, Investec.

Over the month, the Gartmore Corporate Bond Fund, Gartmore High-Yield Corporate Bond Fund and the Gartmore SICAV Sterling Corporate Bond Fund, which each hold a position in Kensington, delivered returns comfortably in the top-quartile of their respective peer groups.

Simon Surtees explains: "Kensington Group's bonds, because they are subordinated and because they were issued by a company operating in a relatively high-risk area, have traded in the past on a spread in excess of 300 basis points over risk-free government bonds".

"However, the spread on Kensington's bonds tightened in to just 120 basis points on news of the takeover, to reflect the superior credit quality of Investec (investment grade, "BBB"-rated)".

"In price terms, this translated to a 5 per cent rise in the value of Kensington's bonds." Special Offers For the Gartmore Cautious Managed Fund, the Gartmore Global Focus Fund and the Gartmore MultiManager range of Funds, for all lump sum investments until 30th September 2007.

1% discount on the initial charge 4% initial commission No Initial Charge on Investment Trust Schemes New investments into the company's investment trust ISAit, PEPit and SAVEit schemes; No initial charge for new investments £1,000 lump sum and minimum transfer value £50 minimum amount for monthly savings Source for all performance data: Lipper.

Basis for OEICs: Mid to mid, net income reinvested and net of fees in UK Sterling terms.

Basis for SICAV: gross income reinvested and net of fees as at 31st May 2007.

Ends.

• Gartmore: contact details and other news
• Email this article to a colleague
• Insidemoneytalk Home Page

Search the Pro-Talk network of sites