The FTSE All-Share Index rose 4.4% in August. The Mid 250 and Small Cap indices rose 5.9% and 4.6% respectively, outperforming the FTSE 100 which rose 4.2%. A mixture of defensive and cyclical sectors led the market higher with weakness in commodity sectors continuing to be a feature.At the stock level, operationally geared domestic consumer recovery plays performed strongly with house builders such as Barratt Developments +55% and Taylor Wimpey +38% at the top of the leader board. The other top performing stocks were all subject to bid approaches - Lonmin +43%, Michael Page +42% and Benfield Group +41%. Smaller oil production stocks and mining stocks were the weakest performers in the market, with Heritage Oil -29% and Xstrata - 16% following its bid for Lonmin.The oil price continued to fall in August which should be broadly positive for equities as corporate input cost pressures ease. However, the recent precipitate decline in sterling is likely to raise retailers import costs and is generally unhelpful for domestic inflation (although this may help UK export growth, as has been the case in the US). This may prevent the UK monetary authorities from cutting interest rates for longer than the market currently anticipates.During the month we took profits in Carnival, Sainsbury, SSE and Shire.We exited three stocks completely, British Airways, London Stock Exchange and Smith & Nephew.Later in the month we bought back into LSE at levels around 20% lower. We also bought Next, SSL and WPP.While the core of our portfolio remains defensively positioned, we are finding opportunities to buy consumer cyclical and financial stocks that we think offer good value even if difficult trading conditions persist for some time.In August, the fund outperformed with a relative return of +1.2% rising 6.2% (close on close) while the benchmark FTSE All Share Index rose 5.0% (close on close). During the month both sector and stock selection was positive. Our underweight in the mining sector and overweight position in the beverages, pharmaceutical and media sectors were the most significant contributors to sector outperformance.
431.30p
