Is the European Central Bank (ECB) behind the curve in not cutting interest rates?
A. I think the ECB is right to monitor the situation because historically a slowdown is followed by sticky inflation. If rates are cut now there is the risk of more inflationary pressure 12 to 18 months down the road. Q. How is this influencing where you invest? A. It means we are cautious as we expect earnings and margins to be revised down over the next six to nine months. However, the good thing about investing in small caps is there is always an opportunity to find growth, you just have to look harder to find it. One major overweight position in the fund at present is oil services. In a world where credit quality has deteriorated, the one set of companies that continue to pay their bills are oil companies. There is no credit risk in the sector, plus they need to spend more, which gives them great pricing power. There is a lot of visibility in the cycle and we expect the story to remain strong to 2010 to 2011. We don’t know another area of the economy that has this long-term strengt
