Five investment themes for UK recovery
The overall message from Chancellor George Osborne was that the UK economy is recovering, but there remain hurdles on the way.
Adrian Lowcock, senior investment manager at Hargreaves Lansdown said: “The outlook for the UK economy has improved significantly in 2013, and increased confidence has trickled down to the stock market, with the FTSE All Share rising by 16% this year.
“The government’s focus on reducing the costs of doing business in the UK should be good news for investors in the long run.”
Below, Lowcock lists five key investment themes to benefit from the pickup in growth and the announcements made in the Autumn Statement.
After years of sluggish recovery, the UK economy is growing again. The Office for Budget Responsibility more than doubled its growth prediction to 1.4% for 2013 and expects it to rise to 2.4% in 2014.
Lowcock suggests investors access this theme through the Jupiter UK Growth fund, managed by the experienced Ian McVeigh.
The fund is up 51.4% over three years to 4 December versus an average of 33.5% for the IMA UK All Companies sector.
The government will double the UK Enterprise Fund commitment limit to £50bn, helping British exporters take advantage of opportunities in new and emerging markets in the hope to double exports by 2020.
Lowcock suggests taking a look at the Lindsell Train UK Equity fund, which invests in strong global leaders such as Diageo and Unilever.
The fund is up 66% over three years, nearly double the average return for the peer group.
The Chancellor announced a new tax relief for shale gas production, and further reforms to make the most of the UK’s science base, including a new network of Quantum Technology Centres.
Earlier in the week, the government also announced £375bn of infrastructure spending over the next 20 years.
“Investors could get exposure to this area through a globally diversified fund such as First State Global Listed Infrastructure,” Lowcock said.
Over three years, the fund has outperformed the average 21.8% return of the Global sector to deliver 28%.
The government will issue £1bn in loans to unblock large housing developments and give local authorities additional flexibility to increase supply and support new affordable housing.
Lowcock said: “The Old Mutual UK Mid Cap fund, managed by Richard Watts, is overweight house builders and has 10.2% exposure to the household goods and home construction sector.”
The fund, which is in the IMA UK All Companies sector, is up 60.4% over three years.
The retail sector, particularly smaller companies, will benefit from a discount in business rates of up to £1,000 in 2014-15 and 2015-16 for retail properties with a rateable value of up to £50,000, and a 50% discount from business rates for new occupants of previously empty retail premises for 18 months.
Lowcock said: “Richard Buxton, manager of the Old Mutual UK Alpha fund, has been successfully playing the UK recovery theme. With 7.6% in retailers, this fund should benefit from any resurgence in the retail sector.”
Buxton’s fund, also in the UK All Companies sector, is up 46.1% over three years.