Buyout speculation and a pick-up in investor risk appetite has helped power UK mid-cap stocks to reverse a 2022 trend of underperformance versus their blue-chip cousins. Over the past month, the FTSE 250 index has rallied 8.3% compared with a 4.7% gain from the FTSE 100.

This represents a stark turnaround for UK mid-caps, which struggled through the first nine months of 2022 as investors turned their backs on the index as the pound slumped. Since the start of the year, the FTSE 250 has lost more than 22%, while sterling fell from $1.35 to $1.13 versus the dollar.

Takeover speculation has swirled around the UK market recently with office space firm IWG (IWG) the latest FTSE 250 constituent to have potentially  drawn interest from private equity investor CVC Capital Partners earlier this week.

CVC was reported to have approached the UK’s biggest serviced office provider about a £1.5 billion deal that could trigger a broader break-up of the group. CVC is believed to be one of several buyout firms to have approached IWG, previously known as Regus, about acquiring The Instant Group, its digital arm, although IWG has yet to officially confirm or deny the reports.

Buyout talks have also landed on the airlines industry, with budget flyer EasyJet (EZJ) said to have emerged as a takeover target of International Consolidated Airlines (IAG), with the British Airways-owner believed to be keen to expand its leisure travel operations in the face of a slow recovery of business travel.

That saw EasyJet shares rally 6% in a day (31 Oct), with the shares chalking up gains of more than 28% over the past month, with EasyJet having previously drawn interest from discount peer Wizz Air (WIZZ), the Hungary-based airline.

Investors have also been backing a recovery at sports car maker Aston Martin (AML) despite the business remaining stubbornly loss-making. It is the best-performing FTSE 250 stock over the past month.

This year the FTSE 100 has proved to be one of the world’s most robust major stock market indices, losing less than 3%. That compares to the US S&P 500’s 20% decline, a 32% fall for the Nasdaq Composite and 13.5% slide of the Euro Stoxx 50.

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