The market fell sharply in September and smaller companies underperformed their larger counterparts. Concerns over inflation have given way to worries over poor growth and problems in the banking system. Chemicals and healthcare, where we are overweight, were amongst the best sectors.Sector allocation was broadly neutral for the fund's performance although the overweighting in oil services and underweighting in financials detracted. We still have a zero weighting in banks, though we are overweight in insurance. Stock selection was a strong positive.Holdings that added value included Vacon, the AC drives manufacturer; Symrise, the flavours and fragrances company; and Takkt, the office supplies business. We bought paper machinery company Andritz and added to Belgian food retailer Colruyt. We sold cable manufacturer Nexans and French china clay and building materials business Imerys.We remain cautious on the markets, but inflation is less of a concern and may already have peaked. We are more worried about the problems in financial markets along with slowing growth and rising unemployment across Europe. The fund remains defensively positioned.
10.09
