It was not as plain sailing as other Summer months, but we ended August with a seventh straight monthly advance for global indices which recorded fresh highs. Improving bottom-up corporate news flow and ample liquidity did its best to offset a growing wall of worry spanning the Delta variant and supply chain woes to peak earnings and slowing macro momentum. M&A enthusiasm continued amongst UK midcaps while the IPO pipeline looks set to pick up again as we enter the Autumn months.
Turning to performance, leadership of equity markets is broadly inconsistent by style. ‘Normalisation’ optimism means bouts of outperformance for cyclical and more economically sensitive industries. In the UK, we saw Industrials, Technology, Real Estate Utilities and Healthcare sectors perform well in the period while Resources, Energy and Consumer focussed industries lagged.
We were pleased to see L&G UK Select Equity outperform its benchmark by 70bps during a strong month. Sector allocation made a positive contribution, led by our underweight to Resources and overweight in Real Estate. For selection the gains in Industrials were offset by weakness in our off-benchmark Technology names. At the stock level, we saw Ceres Power, RWS Holdings, Trustpilot, Network Intl, Tritax, Ocado Group and Marshalls all outperform. Turning to negatives, the largest detractors were Alphawave and Darktrace. On trading activity we introduced a new position in Weir Group and sold Rio Tinto as we switched our mining exposure to the more favourable positioning of the mining equipment sub-sector.