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UK Mid Cap strategy - April 2021

  • 02 June 2021 (5 min read)

Economic data continued to show improvement

  • UK equities continued to move higher
  • The FTSE 250 Index rose above 22,000 points for the first time in its history
  • Growth stocks were once again in favour in April

What’s happening?

The continuing roll-out of COVID-19 vaccines, declining death and hospitalisation rates, and growing expectations of a strong economic recovery drove UK equities higher in April.

The FTSE 100 Index broke through 7,000 points mid-month, for the first time since February 20201 , while the FTSE 250 Index rose above 22,000 points for the first time in its history. The latter index is more weighted towards domestic, mid-sized companies that are expected to benefit directly from an opening up of the UK economy later this year.

Economic data continued to show improvement. The UK economy shrank 1.6%2 in the three months to February, which was better than expected. In February, GDP3 grew by 0.4%2 over the month. Retail sales soared by 5.4%2 month on month in March, while February’s increase was revised higher to 2.2%2 . The unemployment rate fell to 4.9%2 in the three months to February, which was better than market expectations of 5.1%2 and marked the second successive monthly decline. Inflation picked up in March, with the consumer price index rising by 0.7%4 year on year, up from a 0.4%4 increase in February. Upward movements in petrol and clothing prices drove the rise in inflation. Meanwhile, UK house prices rose by 2.1%2 – the fastest pace for over 17 years – in April. The extension of tax breaks by Chancellor Rishi Sunak was a key factor behind the upward move.

Portfolio positioning and performance

The strategy performed positively in absolute terms and outperformed its comparative benchmark, the FTSE 250 ex IT Index. From a sector perspective, the strategy benefitted from being overweight the technology sector, with positive stock contributions from positions in Future ( a specialist interest media company), Learning Technologies (a provider of e-learning services and technologies) and Bytes Technology (a leading provider of world-class IT solutions). Stock selection within the basic materials and health care sectors contributed negatively to relative performance. 

Other positive stock contributions of note include Intermediate Capital Group (a global alternative asset manager), Grafton Group (a manufacturer and retailer of building supplies) and OSB Group (a specialist lender). Detractors on a relative basis included Synairgen and Bodycote, as well as not owning IMI.

We used share price volatility to add to core holdings and make reductions. We took a new holding in XP Power, who designs and manufactures products used to supply, regulate, and distribute electrical power. We also took a holding in Darktrace, as part of its IPO process. Darktrace provides an AI solution to detecting cyber-threats.


The style rotation from Growth to Value has been a recent headwind, given the strategy’s long-term focus on well capitalised businesses that are growing/compounding their earnings and cashflows. The Strategy benefitted over the month as growth stocks were once again in favour.

Looking ahead, the path to economic growth, will be determined by the speed and success of the vaccines roll out on a global basis. Inevitably, the trajectory of economic growth, inflation, currency movements and the cost and availability of capital will prove unpredictable, at least on a short-term basis. In these times of volatile news and capital flow, we continue to focus on those companies that we believe can compound their earnings, are operating in end markets that are expanding and where balance sheet strength is supportive of that growth.

No assurance can be given that the UK Mid Cap Strategy will be successful. Investors can lose some or all of their capital invested. The UK Mid Cap strategy is subject to risks including; Equity; Smaller companies risk; Liquidity risk.

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Why UK equities?

The UK equity market is a key geographical market and source of potential returns for investors globally

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AXA Framlington UK Mid Cap strategy

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    Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment.  Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.

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    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. 

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