They are concerned the election of another coalition government could cause investors to sell down their UK holdings on fears about an uncertain political landscape.

Last month, M&G’s head of retail fixed interest, Jim Leaviss, warned sterling could suffer in the event UKIP wins a substantial number of votes in the upcoming election, as various polls revealed the party has gained more support than expected.

Kames Capital’s head of multi-asset investing Scott Jamieson added it will be hard for investors to anticipate the consequences of the next election.

“Markets at the moment are very skittish, so any uncertainty is going to lead to negative pricing,” the manager said.

“Whether or not there could be a Conservative coalition [with UKIP] is not clear, but these guys will do a deal with the devil when the time comes, and that is the problem.”

These concerns have caused some managers of multi-asset portfolios to reduce their allocations to the UK, favouring other markets as better value options.

Hilary Wakefield, EFG Asset Management’s head of portfolio management UK, has reduced UK equity exposure by a third in his Global Alpha fund and now has just 17 per cent invested in the region while, by contrast, US equities make up 47 per cent of the portfolio.

“We have been taking money off the table in the UK, as we are quite concerned about the politics. The UK may struggle to make much headway in the lead-up to the election, especially as a lot of foreign investors may take a back seat.

“We still have some exposure, but that is more because we still like equities in general. We did have a bigger weight in sterling and UK equities, but decided there are better opportunities elsewhere, such as the US and southern Europe.”

Caspar Rock, chief investment officer at Architas, has also reduced allocations to the UK and sterling assets, expecting a spike in volatility in the early part of next year.

“The general election will bring concern and volatility. There are a lot of unknowns going on in the UK,” he said.

“UKIP may not have much of an impact on the government after the election, but they will affect the results. It is also interesting what is going on in Scotland now. Miliband may lose a lot more seats there [than expected].”

Investors are particularly concerned about the mid-cap part of the UK market, which is much more exposed to the domestic economy than the FTSE 100’s more internationally-focused companies.

Mid caps had a very strong year in 2013 but, year to date, the FTSE 250 has underperformed the FTSE 100, down 2.2 per cent versus a 1.4 per cent fall in the large-cap index.

Miton’s multi-asset manager David Jane said: “Mid caps will be hurt if people worry about the election, because they tend to be more domestic and more risky in that sense.

“BP, Glaxo, or Unilever are not going to be very affected by the UK election, but mid-cap domestic players are pretty much stuck with the UK economy driving it.

“We sold out of a lot of mid and small caps at the start of the year. The value now seems to be in the high yielding, boring stocks, or dropping right back down the market-cap scale to smaller stocks.”