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Is it really a ‘new, unique era’ for UK investments?

Is it really a ‘new, unique era’ for UK investments?
Matt Browning
Written By:
Posted:
10/10/2024
Updated:
15/10/2024

One of the world’s leading investment managers has claimed the market faces a “new, unique era” thanks to a number of structural shifts never seen before.

This is due to a “confluence of several transformational changes” driven by at least three major factors – accelerated digital disruption, healthcare innovation and an industrial renaissance.

Traditionally, there would be one main driver of change among investments: the company that holds £2.1trn in assets claims.

So, in the 1970s, this would be oil and metals, in the 80s, this would be electronic and computers, and in more modern times, during the noughties, this would be the age of digital disruption.

The claim on the multiple drivers in the 2020s is a view mirrored by 60% of UK intermediaries, according to research from Capital Group UK.

This was part of the New Perspective Fund UK (NPF UK), the flagship strategy as an open-ended investment company (OEIC). An OEIC is a UK fund that can create new shares depending on the investor’s demands.

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It has the long term in mind and is designed to flourish on the flexibility of being able to spread investments across a wide range of options.

Capital Group described it as “a time-tested strategy built for an evolving world” and an approach that offers strong growth opportunities that are “capable of driving and benefitting from global change”.

‘Unique shift all happening at once’

Steve Smith, equity investment director at Capital Group, said: “Change in the global economy is constant, but the current landscape stands out due to a unique blend of numerous structural shifts happening all at once.

“In this new era, investment strategies like New Perspective offer the flexibility to navigate market shifts unrestricted by sector, theme, or style, to capture a broad opportunity set and a new reality of investing.”

The firm’s head of UK financial intermediaries Chris Miles added that its research shows “70% of intermediaries consider it difficult to find an equity fund head that can demonstrate its ability to invest through market cycles and periods of uncertainty”.

He and the Capital Group team believe the investment approach, which has been a staple of the company for 51 years, gives investors the best opportunity of missing any possible ‘dog funds’.

This long-term approach gives them a competitive edge over other funds, Miles said.

It is a thought process that opts against investing in the much-heralded ‘Magnificent Seven’ – the collection of American tech giants that drove more than half of 2023’s 24% gain in the US S&P 500.

Those companies are Apple, Microsoft, Alphabet, Amazon, Meta, Tesla and Nvidia, and they are built on “high margins, high returns on capital, and high growth”.

So how can investors tap into this long-term approach to bolster their portfolio, and how widespread is Capital Group’s view among experts?

Claudia Quiroz, head of sustainable investment at Quilter Cheviot and manager of the Climate Assets Funds range, agreed (mostly).

‘Lower carbon footprint economy’

Quiroz told YourMoney.com: “From a thematic standpoint, a focus on accelerated digital disruption, healthcare innovation, and an industrial renaissance aligns with our investment strategy. These themes drive a more efficient, lower carbon footprint economy, delivering more with fewer resources.”

She added: “However, decarbonising the economy deserves its own spotlight as it fuels technological innovation and efficiencies across sectors, including digital and industrial.”

So going greener with your investments might be the driving change for the rest of the 2020s, according to Quiroz.

In terms of gaining a competitive edge on other investments, Quiroz said that “diversification is crucial for investors.”

“Thematic investing helps identify beneficiaries in growing sectors, providing a modern framework for stock picking. And at Quilter Cheviot, sustainable investment has a long track record, driven by decarbonisation, digital advancements, and demographic shifts,” she said.

‘Considerable breakthroughs in biotech’

Darius McDermott, managing director of FundCalibre and contributor to YourMoney.com, said: “It’s undoubtedly true that we are living through a time with more numerous drivers of transformational changes.

“Digital disruption is taking place on many fronts, healthcare not least through considerable breakthroughs in biotech, and an industrial renaissance with new ways of learning, producing and trading.”

However, McDermott believed that, within the numerous drivers, a common thread means we may be looking at this period in the future through an AI lens.

He added: “However, I think that there are inherent crossovers between all three of these drivers. For example, AI is driving digital disruption, being used to speed up the process in which drugs are discovered and developed and being increasingly used and integrated into industrial processes.”

McDermott also echoed the importance of not holding back on diversification for your future investment decisions.

“Diversifying between the three sectors can still mitigate risks, as each may react differently to various market conditions. However, I would suggest that just diversifying between the three isn’t enough”, he said.

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