Within the MI Diversified Strategy Fund you will typically find an allocation to structured notes, an asset class which we, the investment manager, have a long history of analysing. We like to hold an allocation to structured notes
due to their defined characteristics. Whilst we don't know what return will be achieved for certain, they are still at
the mercy of market movements, we know what this would be in defined market conditions.

Many of the notes which we hold have the FTSE 100 as their underlying index. Depending on terms available at the time, we believe structured notes to be an efficient way to gain exposure to this index, particularly given the large number of analysts covering stocks here. This can make it difficult for fund managers to gain a competitive edge and hence many in the IA UK All Companies sector look to allocate to FTSE 250 companies where coverage is lighter.

To prove our case in point we have seen the maturity of our Goldman Sachs FTSE 100 Autocall. This was a note which could run for a maximum of 7 years, potentially paying 11.58% for each year held, but with the opportunity to kick out from it's 1st anniversary and every annual anniversary thereafter if the index was at or above it's initial start level, being 7,228.62. Whilst the daily value would move as the index rose or fell, we knew that we would not see a permanent loss of capital unless the index was below 65% of the above strike level on it's final day.

When we are assessing such investment opportunities we are not only looking at the return profile of the investment but also relative to equities. We therefore calculate what the annualised return would be for each year that it is potentially held to compare this to the potential compound return from equities. With regard to this note, an annualised return of 8.84%, even if it were to run to it's final year, appeared attractive. Indeed, at the time of initial assessment, this note running to it's final year would have outperformed the FTSE 100 total return index on 46 out of the last 60 rolling 7 year periods.

On it's 1st anniversary this note has matured, paying us our 11.58% return. But how does this compare? Well compared to the index the results are pleasing. Over the same period the FTSE 100 on a price only basis returned only 2.88%. On a total return basis the index posted a return of 7.75%, our note therefore showing a significant level of outperformance. Compared to the IA UK All Companies sector average return of 13.46% the note has lagged, however we know a lot of this was due to the FTSE 250 posting a return of 18.11% over the same period.

As far as our allocation to the FTSE 100 goes, we remain very content with the return achieved!

This article is for information purposes only and should not be construed as advice. We strongly suggest you seek independent financial advice prior to taking any course of action.

The value of this investment can fall as well as rise and investors may get back less than they originally invested. Past performance is not necessarily a guide to future performance.

The Fund is suitable for investors who are seeking to achieve long term capital growth.

The tax treatment of investments depends on the individual circumstances of each client and may be subject to change in the future. The above is in relation to a UK domiciled investor only and would be different for those domiciled outside the UK. We strongly suggest you seek independent tax advice prior to taking any course of action.

Past performance is not a guide to the future.