Brexit no deterrent for UK investors
Investors continue to focus on UK shares and fixed income in spite of Brexit, finds new research by Willis Owen.
By the end of the tax year, 57% of Willis Owen clients will have invested in UK equities, and 46% said UK fixed income – significantly more than any other asset class. Surprisingly, the Eurozone also features highly, in spite of some dismal growth numbers from across the Channel.
Only around a quarter (24%) of UK ISA investors say Brexit has prompted them to reduce the amount they hold in UK assets. Around half (52%) say it hasn’t affected them either way, while 3% say they have invested more because of it.
UK retail investors believe UK equities look cheap: one in ten (9%) strongly agree with this view. 54% of ISA investors believe UK equities currently look attractive over a five-year period, and just 11% think they look unattractive.
This chimes with many asset allocators and advisers. Jim Wood-Smith, chief investment officer private clients at Hawksmoor Investment Management, said: “With business seeming to be preparing for a sticky outcome, so the potential grows for something rather better to come from anything other than No Deal. This is what underlies our conviction that whatever happens with you-know-what (Brexit), there are cheap assets in the UK. And that many will look back on early 2019 and wonder how they were so blinded by the short-term as to have missed the opportunities presented on a silver salver.”
Willis Owen agreed that Brexit means many UK stocks are now undervalued. If pointed out that if Brexit is delayed or even abandoned, the UK stock market could see a significant rise. Alternatively, if there is a ‘bad’ Brexit, there could be a fall in the value of the pound that could benefit many FTSE 100 companies.
Adrian Lowcock, head of personal investments at Willis Owen, said: “There is no doubt that Brexit has had a negative impact on the UK stock market, but this means that many stocks are now undervalued and represent a very attractive proposition for investors with a longer term view. However, there may also be short-term volatility with UK equities.
“If Brexit is delayed or even abandoned, the UK stock market could see a significant rise. And if there is a bad Brexit, there could be a fall in the value of the pound that could benefit many FTSE 100 companies which are predominately internationally focused and whose earnings are in US Dollars. Our research would suggest that the opportunities around UK stocks are not lost on many ISA investors.” It currently recommends the Merian UK Smaller Companies, Lindsell Train UK Equity and Man GLG Undervalued Assets funds in the UK.