It was a mixed month for equities, with tech stocks lifting US market performance, while in the UK and Europe volatility was much more evident as both regions delivered negative returns. UK equity market performance proved most disappointing, with cyclicals and value stocks hit hardest. By sector, Tech, Materials, Healthcare and Utilities outperformed. Telecoms, Financials, Consumer Services and Industrials were out of favour.
For the fund, sector positioning was unhelpful, with the underweight in materials the biggest headwind. Meanwhile the lack of exposure to mega-cap defensive names also detracted value, where Astrazeneca, Diageo and Unilever performed strongly. Stock selection saw mixed performance, with gains in financials and oil & gas offset by weakness within industrials and technology.
At the company level, performance was impacted by weak trading updates from Taylor Wimpey and DS Smith. Taylor Wimpey flagged weaker margins than the market had expected as low level of site activity and ongoing productivity losses through social distancing saw the under absorption of fixed costs versus prior periods. DS Smith reported weak performance from its US assets where paper pricing has been very weak and impacted overall group returns. SSP Group and Micro Focus International were additional laggards. There was some positive performance from Next who reported numbers above previous base case expectations and also GoCo where their tech led auto save proposition continues to deliver very strong growth.
In terms of trading activity, we introduced a small position in De La Rue, the currency and authentication solutions business.