The market fell sharply in September. Consumer goods, where we are neutrally positioned, outperformed, as did healthcare, where we are overweight.The fund's sector allocation detracted modestly from performance as our overweighting in materials and, surprisingly, our underweighting in financials proved unhelpful. We still have a near-zero weighting in banks but are overweight in insurance. The fund is also overweight in materials, notably chemicals. Stock selection was a strong positive with holdings such as Sampo, the Scandinavian insurer, adding value.The fund also gained by avoiding the pitfalls, with no exposure to ArcelorMittal and Nokia, which were hit by the poor prospects for steel prices and handset sales respectively. Detractors included Umicore, a victim of falling metal prices. We bought Allianz (strong insurance franchise) and Reed Elsevier (solid franchise). We sold KPN and Veolia, reducing the exposure to telecoms and utilities.We remain cautious on the market and the fund is defensively positioned. We have further reduced the number of stocks and there are currently fewer than 50 holdings.
3.67
