"How are you? We have been very busy raising capital and building assets ahead of RDR, this is a great opportunity for us as more intermediaries look to outsource investment management.

"Generally speaking we have navigated markets well, however UK gilts have been our Achilles Heel! I described our positioning to our clients as cautious rather than defensive due to the lack of traditional anti equity or non correlated assets such as government bonds. I can understand why the Bank of England, our Banks and a few others may be insensitive to gilt prices, but I find it hard to invest in a negative real yield. The same for cash deposits, but at least it is a source of short term liquidity to exploit confidence dips in equity markets. I still prefer strong balance sheets, income and profits derived from the "progressive" rather than the "stagnant" economies. The attached article from Renaissance Capital sums it up very well indeed and is worth sharing with the Fullermoney collective."

David Fuller's view Fine thanks and I certainly agree with you on Gilts as an investment given the negative real return, although momentum traders had a good run in the sector.

Thanks for the excellent report: here is a brief sample:

The intense media coverage of the problems in developed economies (better called "stagnant economies" now) continues to mask the potential of the rest of the world. The irony is that 90% of the media's 24/7 coverage is concerned with the West, whereas 90% of the opportunity is in emerging markets.

Behind the bad news coming out of Europe and the US, there is a more significant story that is being ignored. This crisis has accelerated a change that was already well advanced: emerging markets have become leaders in the new economic world order and their importance will only grow, as they can also play the role of saviours either by helping to bail out the indebted countries of the West or providing dynamic markets for their companies to expand into.

The latest International Monetary Fund's economic outlook predicts the global economy will grow at 4.0% a year in both 2011 and 2012, but the advanced economies will expand by only 1.6-1.9%, while emerging and developing economies will grow by 6.1-6.4%.

Why is the difference so great? The short answer is that crises in the emerging world look worse, but do less lasting damage. Typically, most of the emerging markets had better fiscal and financial positions going into the meltdown in 2008. Since then, high underlying growth and sound macroeconomic policies are making fiscal adjustment to the new realities much easier.

Exports have largely recovered, and whatever shortfall in external demand they experienced has largely been made up by increases in domestic demand. Capital outflows have turned to inflows, due to both better growth prospects and higher interest rates than in the advanced economies. More fundamentally, the emerging markets continue to put in profoundly superior productivity growth and, in most cases, benefit from vastly superior demographics.

I could not agree more and this has been Fullermoney's view since 2003, although our favourite companies this year have been the mostly high-yielding western Autonomies leveraged to the Asian-led growth economies. Tech has also been outstanding, as we can see with the Nasdaq's relative strength.

Now that monetary policy is becoming more accommodative in growth economies, I expect their relative strength to improve and their currencies should also firm.

(See also yesterday's review.)