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Investors return to the UK, says the Share Centre

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06/09/2017
The fund choices made by investors suggest confidence in the UK market is returning, says Sheridan Admans, investment manager at The Share Centre

 

The group’s 10 top traded funds in August 2017 include two companies focusing on UK medium- and smaller-sized companies, plus a number of UK equity income options.

Admans says: “If the top traded funds list for August tells us anything, it’s that confidence in the UK market is being restored, as two UK-focused companies enter the list for the first time in a few months. Not only that, it also appears as though investors are gently moving away from large cap funds with overseas exposure and are instead opting for funds with a heavier weighting to smaller and mid cap income companies perhaps indicating a need for further sector diversification in these uncertain times.”

UK stock markets have lagged their global peers as a result of pessimism surrounding Brexit and the weaker pound. The FTSE 100 is up 7.3% for the year to date, compared to 12.75% for the main US index, the S&P 500 and 13.4% for the German Dax. The FTSE 250, which focused on medium-sized companies has fared better, rising 8.9%, but is still behind other equivalent indices. This has led some to suggest that there may be value in UK equities.

The Share Centre said the CF Woodford Equity Income was the top traded fund in August, showing that investors remain confident in Woodford despite a few high profile blow-ups in his portfolio during the month. Terry Smith’s Fundsmith Equity was also popular. This invests in defensive, resilient companies with advantages that are difficult to replicate.

Old Mutual has two funds in the top 10 – its UK mid-cap fund and UK smaller companies funds. Admans said: “Investors are perhaps beginning to look away from the more reliable larger companies and opting for exciting new companies that offer growth and income. This could also be down to sterling being below pre-referendum levels and investors recognising that a rise in sterling should see mid-caps benefit more than large caps. Indeed, the FTSE 250 receives approximately 50% of revenue in Sterling, therefore providing greater diversification than the FTSE 100 where c.75% of revenues are derived from overseas activities and are therefore more reliant on a weaker currency.”

Elsewhere, investors showed signs of looking beyond Western markets for their international exposure, with the Legg Mason Japan and Jupiter India funds proving popular. Admans said: “India has been capturing investors’ attention as the government pursues a reform agenda, while the Japanese government has been aggressively pursuing sustainable inflation, something which has eluded it for decades.”

 

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