Where investors are putting their money in 2021
The study by IW Capital polled investors on their approach to investing in 2021 and beyond, noting that the pandemic has led to a shift in attitude among investors, particularly the different sectors they may look to back.
The study found that 45% of UK investors were looking to back green or sustainable businesses in their investing this year, while more than a third (34%) are planning to put their money into firms active in biotech, medtech or pharmaceuticals.
Given how reliant we have all become on online retailers over the past year, it perhaps isn’t surprising that almost a third (29%) of investors are planning to back online retail businesses and technology in the coming year, though the strength of support for the hospitality sector is notable given it has largely been locked down for the last year. Despite this 16% of UK investors are planning to invest in businesses in this sector.
What’s more, while the year has been difficult for many businesses, it has also seen a spurt of new start-ups, with IW noting that there has been a 13% increase in new businesses opening up in 2020 compared to in 2019. Around 16% of investors say they are looking to back start-up businesses.
Luke Davis, CEO of IW Capital, said that investor sentiment has been transformed throughout the pandemic, and argued that with green and sustainable businesses set to play a key role in the resurgence of our economy going forward, it is no surprise to see how attractive they are to investors.
He continued: “Technology is also proving to be an enticing investment option, after a year of digital transformation that has shaped the model of many businesses who have remained strong throughout this period of economic unrest.
“For those with investment power, there is now a more personal responsibility to back the future facing businesses that are sure to benefit both our society and our economy. Personal experience is now becoming a key factor in how we as investors are looking to spend our money and a major influence on our portfolios.”
Finding the right investments
Understanding what sort of sector or region you want to target with your investing is only the first step however; you also need to think about how you invest, for example whether you go for individual stocks and shares, investment funds or trusts.
A new study by Interactive Investor has found that investment trusts have outperformed funds in almost every sector over ten and 20-year terms, though performance between individual trusts and funds can vary significantly. For example, this week’s ‘Spot the Dog’ report from BestInvest ‒ which flags up the consistently underperforming investment funds ‒ found that in some cases, funds underperform their sector by as much as 42%.