FCEV F&C Event Driv

    RNS Number : 2791B
  F&C Event Driven Limited
  13 August 2008
   

    F&C Event Driven Limited 
    12 July 2008 

    Estimated Monthly NAV 31 July 2008 



    F&C Event Driven Limited (the "Company") 



    As at the close of business on 31st July 2008, the estimate net asset value per share of the Company's ordinary shares (� shares) is
87.50 pence. 


    This valuation, which has been prepared in good faith by the Company's investment adviser, is for information purposes only and is based
on the unaudited estimated valuations supplied to the Company's investment adviser by the administrators or managers of the Company's
underlying investments. Such estimates may be subject to little verification or other due diligence and may not comply with generally
accepted accounting practices or other generally accepted valuation principles. In addition, some of those estimates may not be supplied on
a regular or timely basis with the result that the values of such investments are based on the latest available estimates which may be some
time before the date set out above.  21 of the Company's 22 managers have been valued within 7 days of the above date. Certain other risk
factors which may be relevant to these valuations are set out in the Company's prospectus. 

    Estimated top ten holdings and all holdings over 5%: 

 Canyon Value Realization Fund (Cayman), Ltd  7.9%

 Glenview Capital Partners (Cayman) Ltd       7.5%

 Polygon Global Opportunities Fund            7.3%
 NGA Fairfield Limited                        6.7%
 Tosca Fund Limited - USD Class               6.3%
 Taconic Opportunities Offshore Fund Ltd      5.7%
 Litespeed Offshore Fund Limited              5.7%
 Shepherd Investments International Ltd       5.5%

 Amber Fund (Cayman) Limited                  5.5%
 LIM Asia Arbitrage Fund                      4.9%

    Data source: F&C Partners LLP; Holdings shown as a percentage of Fund Net Asset Value.


    Estimated month asset allocation and performance attribution: 

               Distressed Debt  Emerging Market and   Equity Long / Short  Merger Arbitrage /    Multi Strategy
                                Asia                                       Event Driven          Arbitrage
 Weight        18.2             5.3%                  15.0%                43.7%                 17.8%
 No. of Funds  4                1                     2                    13                    4
 Attribution   -39bp            -3bp                  -17bp                -94bp                 -42bp

    Data source: F&C Partners LLP; Allocation shown as percentage of Hedge Fund investments, Attribution based on Event Driven GBP fund
Gross Performance. 


    July comment: 

    In July the Event Driven Fund was down -1.85%. Event driven, multi-strategy and distressed were the largest detractors. 

    July reversed a consensus trade that has been fuelling hedge fund returns for the last 12 months. That consensus was that there was, on
the one hand, a growing and unstoppable demand for commodities and an imminent and sharp slowdown in the US and the west, on the other hand.
The trade was to be short financials, housing and consumer stocks, short the US$ and long oil and oil related stocks. In July, oil dropped
from its peak of $145 to $124. The $US rose from a low of 1.59 against the Euro to 1.56 and the S&P Index of investment banks and brokerage
firms rose nearly 19% from its low set on 15 July - albeit only ending marginally up on the month.

    So, why is this important? Well, it signals a change in the markets view on two competing theories on global growth. The first thesis
was that Asia and their commodity partners would continue to grow regardless of the economic and financial troubles in the West - even at
the expense of the West. The second was that the nature of the slowdown is global and that the emerging economies of Asia could not
completely decouple. The market is now leaning towards the latter. The messenger who heralded this piece of wisdom was inflation and the
calling card was oil.  

The fact is that to transform the emerging, populous, agro-economies into the western style middle class consumer societies will take more
resources, energy, oil and skilled labour than exists at the moment. Not every blueprint for every new city is going to get the steel, the
concrete and the power it needs to get off the drawing board. The competition for these resources started to push their prices up with
dramatic effect on the ground. Not surprisingly, governments decided to put social stability in front of economic development. The result
was interest rate rises in India, Indonesia, Philippines, Taiwan, Brazil, Chile, Mexico, Peru, Egypt, Hungary, Romania, Israel, Russia,
South Africa and Turkey. Sure enough, we all got the message!
 
Slowing growth will ease inflation in emerging markets and take the pressure off oil and commodity prices. For the developed markets, this
is as good as a fiscal stimulus as consumers get a boost in disposable income.   

    This still leaves the marauding finger of liquidity. Capital continues to be destroyed in banks and insurance companies faster than it
can be replaced. The resulting liquidity squeeze hurts financial markets and businesses alike. The effects can seem quite perverse. One
manager we talked with this month gave an account of how, in order to hedge himself against liquidity drying up in the European smaller
companies sector, he sold his favourite names short - knowing that they were also the largest names in a number of the more successful funds
run by his peers. Sure enough, they were the worst performers over the following months. But not every oversold name is a buying
opportunity. The same manager gave us an example of a car parts company whose margins had been destroyed by rises in raw materials. The
stock dropped 40%. The market, however, seem to have overlooked the next shoe to drop - a reduction in the number of cars being sold!  

    For hedge funds, opportunities are growing as mis-pricing spreads. But growing opportunity is always coupled with a reduced appetite for
investment - almost by definition. They are walking a thin line - invest too soon and they may not retain the confidence of their clients.
Invest too late and they may miss the best opportunities of the decade. After nearly a year of challenging returns, there are signs that the
flow into hedge funds may be stopping or even reversing. This is a key risk for us as any contraction in the hedge fund sector is likely to
further depress returns.

    In July, the negative performance of the portfolio came from across the board decline in hedge funds. 19 funds in the portfolio suffered
losses while 3 have declared gains. The largest contributor to losses came from the event driven funds York and Seneca which declined 4.7%
and 5.1% respectively. After a significantly negative second quarter, and much press comment, the Tosca Fund had a marginally positive
month.

    For us, as fund of fund managers, this is a complex time. We need to be cognisant of the technicals of the market but resolute in our
selection of talented managers. We believe that our approach of selecting managers who look for value rather than following the crowd will
prove to be a rewarding one. This may not be the end of the volatility but we have confidence that we have secured a front row seat for the
recovery when it comes.








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