Asset manager Aberdeen, IT provider Computacenter and investment bank Investec will all enter the FTSE 100 index of UK large-caps on 19 June, FTSE Russell has confirmed.
Going the other way, housebuilder Berkeley Group, packaging firm Mondi and online property portal Rightmove will all fall to the FTSE 250, where there are nine changes overall.
Fund managers agreed that the number of changes was higher than usual. Tim Service, manager of the Jupiter UK Mid Cap fund, said this is likely due to some big swings in share prices over the past three months caused by "big macro crosscurrents in markets".
These include rising energy costs, the shift in the inflation/interest rate outlook, UK political turbulence, AI capex spending and potential AI disruption, he said.
Anthony Lynch, who co-manages the Mercantile and Claverhouse trusts as well as the JPM UK Equity Plus fund, said: "Index reshuffles tend to become more dramatic when markets are volatile. And that's exactly what we've seen in recent months, particularly following the escalation of tensions in the Middle East."
Indeed, the UK market has experienced volatility of around 14% so far this year, according to James Goodman, co-manager of the Schroder Prime UK Equity fund, "reflecting greater dispersion and disruption across sectors in the UK market".
There are some big themes investors can take away from the latest rebalance, the managers all agreed. Goodman noted that there has been a divergence between internationally exposed companies and more domestically sensitive areas of the UK economy.
"Higher interest rates and the slow pace of planning reform continue to weigh on housebuilding activity and broader repair, maintenance and improvement spending," he said.
Meanwhile, the "noticeable trend" of successful AIM-listed businesses moving into the main market indices is another theme worthy of note.
Lynch added that stocks exposed to currently 'hot' structural growth themes seem to have been promoted at the expense of housebuilders.
"Demand for AI infrastructure, data centres, digital connectivity and the commercialisation of space continues to attract investor capital, reflecting confidence in long-term structural growth opportunities despite a more uncertain economic backdrop," he said.
Below, fund managers highlight their key takeaways from the latest reshuffle.
| FTSE 100 and FTSE 250 index changes in June | |
| FTSE 100 Additions | FTSE 100 Deletions |
| Aberdeen Group | Berkeley Group Holdings |
| Computacenter | Mondi |
| Investec | Rightmove |
| FTSE 250 Additions | FTSE 250 Deletions |
| Berkeley Group Holdings | Aberdeen Group |
| Bloomsbury Publishing | C&C Group |
| Cordiant Digital Infrastructure | Chrysalis Investments |
| Globaldata | Computacenter |
| Hansa Investment Company | Ibstock |
| Mondi | Impax Environmental Markets |
| Rightmove | Investec |
| Rosebank Industries | JPMorgan India Growth & Income |
| Seraphim Space Investment Trust | Marshalls |
Source: FTSE Russell
Housebuilders
Starting with housebuilders and other property-related stocks, these companies have been battered in recent months and have dropped down the indices.
Thomas Moore, manager of the Aberdeen Equity Income Trust, said it was the "most striking theme on the demotions list", noting that the backdrop for the sector could "hardly be more challenging".
"Government plans to drive up housebuilding volumes have so far failed, despite some easing in planning restrictions, as gilt yields hit new highs due to rising inflation, record public sector borrowing and political uncertainty," he said.
Names in the list above include Berkeley, Rightmove, Ibstock and Marshalls, which Lynch said have fallen out of favour as investors price in stickier inflation, weaker consumer confidence and the prospect of interest rates staying higher for longer.
Service noted that he has a short position in Ibstock, the brick manufacturer. Despite being a "well-managed" company with a "decent market position", it is an energy-intensive process to produce bricks.
Meanwhile, on the demand side, "its customers are mostly volume housebuilders, who are under enormous pressure from higher mortgage rates, rising build costs and lacklustre demand", he noted.
"Volumes are down and may drift down further, potentially exacerbating balance sheet concerns."
Technology and AI
Another key theme is the rise of technology, highlighted by the inclusion in the FTSE 100 of IT provider Computacenter. The firm specialises in helping customers source, transform, and manage their technology infrastructure by reselling both hardware and software. This includes data centre infrastructure, which has been in the headlines in recent months.
Goodman said the stock "stands out positively as one of a relatively small number of UK-listed technology businesses that has successfully expanded into the US market".
Service also highlighted the stock, noting it is one of the top positions in his Jupiter UK Mid Cap and the Jupiter UK Specialist Equity funds.
"The business is a classic mid-cap long-term compounder, with a stellar record since it listed 25 years ago. It is one of the world's leading resellers of IT to large corporations, with especially strong positions in the UK, Germany and North America," he said.
"It is well positioned for the AI capex boom, both directly selling to some of the US hyperscalers, and also the secondary demand that's coming from companies in non-tech sectors looking to upgrade their existing technology stacks to prepare for AI integration."
Investment trusts
Another benefiting from the rise in technology is Seraphim Space Investment Trust, which is to enter the FTSE 250 later this month. Kevin Glover, investment director on the client services team at Aberdeen, said it reflects the stock's "extraordinary run" this year, in which the company has tripled its market capitalisation.
"[This] speaks both to underlying portfolio progress and a significant awakening in investor sentiment towards the space theme, driven in part by high profile events like the SpaceX IPO and Artemis II," he said.
This hasn't all been due to the share price, however, with Glover noting that the trust's £137m share raise was the largest in the investment trust sector for several years.
He said the rationale for investing was "less about short-term excitement and more about the market starting to take space tech seriously", although he noted that the speed of the rerating matters. With shares now trading at a "meaningful premium", current momentum will only be sustained by "disciplined capital deployment" and the "continued delivery from the underlying companies".
Cordiant Digital Infrastructure is also on its way into the FTSE 250 after its move to the main market, benefiting from the interest in digital infrastructure brought about by the rise of AI and the need for more data centres.
“The company has evolved over the past few years and has been steadily delivering on its ‘buy, build, grow’ strategy – building out a diversified portfolio of assets, supporting organic growth and adding bolt-ons where appropriate,” said Glover.
“That’s now translating into a more established track record, with consistent NAV [net asset value] progression and solid operational performance across the portfolio.”