Almost one fifth of UK retail investors expect to cut their domestic allocations over the next two years in response to the country’s economic outlook, according to a survey carried out by Dragon Capital.
The survey consulted 1082 adults, of which less than half (492) invested in either shares or investment vehicles.
Of those that did invest, just over two thirds (64%) did so in UK shares and funds. The report said: “One in five of these investors (19%) are set to reduce their investment allocation to UK stocks and funds over the next two years. Around 11% plan to slightly reduce their UK exposure while 8% say it will reduce significantly.”
Dragon Capital’s survey, which was conducted in mid-February, before chancellor Jeremy Hunt’s brighter prognosis about the UK’s economic prospects, was reflective of an investing public that has fallen out of love with UK companies.
Investors have pulled billions from UK funds in the last few months, and the Calastone Fund Flow Index for February demonstrated that this trend was accelerating, as UK equity funds were hit by their third-worst month of outflows. Investors pulled £962m from the sector, with only June and November last year generating worse monthly performances.
Alec Cutler, manager of the Orbis Global Balanced fund, expressed his surprise recently at the lack of attention being paid to UK companies by investors in both the retail and institutional spaces. Speaking at an event celebrating the 10-year anniversary of Orbis’ strategy, Cutler said that companies such as Rolls Royce and construction giant Balfour Beatty were significantly undervalued, and that the same companies would be worth “twice as much” if they were listed elsewhere.
Dragon Capital’s Dien Vu, portfolio manager of Vietnam Enterprise Investments, pointed out that a good year for the FTSE 100 has not repaired investors’ faith in the UK: “Despite a strong 2022, our research shows British retail investors think UK equities look increasingly less appealing for ISA investment in the next tax year, given the current economic forecasts.
“A significant number of investors appear set on reducing their domestic exposure in the next couple of years and will be looking for alternative investment opportunities where they can achieve a positive return.”
