- An innovation-friendly Budget offers investment opportunities for UK Plc
- The majority of the UK equity market experienced significant falls in 2022 meaning valuations are attractive
- UK equities remain chronically under-owned with companies trading at discounts to historical averages and international peers
“The make-up of the UK stock market is quite different to other global markets. It includes more oil & gas and financial services companies than many of its peers and offers less exposure to sectors like technology.
Q4 2022 hedge fund letters, conferences and more
This often leads to it being labelled as an ‘old economy’ stock market, but there is plenty of innovation to be found in the domestic market – and if the growth-friendly policy predictions prove correct this could be unlocked by Jeremy Hunt’s first Budget announcement next week.
Outside of the largest 20 stocks in the FTSE 100 Index, the majority of the UK equity market experienced significant falls in 2022, with the small and mid-cap space bearing the brunt of the valuation de-rating.
Last year’s rout offers attractive opportunities to pick up excellent businesses trading at valuations well below their historic averages and relative to international peers.
These businesses are also more likely to be domestically focused – and therefore more likely to benefit from pro-growth Budget policies such as local investment zones where corporation tax is zero, and incentives to bring retired employees back into the UK workforce.
There is also some expectation that the Chancellor will extend the super deduction which allows businesses tax relief on growth investment.
UK Fund Ideas For A Pro-Growth Budget
FTF Martin Currie UK Mid Cap
Manager Richard Bullas specialises in investing medium-sized UK businesses, often those considered to be operating in the ‘sweet spot’ between growth potential and maturity. He aims to deliver income and capital growth over the longer term by investing in quality companies trading at attractive valuations.
This involves considering both the economic outlook and the merits of individual businesses when choosing where to invest. Bullas is an experienced UK investor and has the support of a team that we rate highly. We think he’s well placed to deliver good long-term returns to patient investors.
Liontrust UK Growth
Managers Anthony Cross and Julian Fosh employ the economic advantage investment process which has served investors well over the years. They think the secret to successful investing is to invest in the few companies with a sustainable edge over the competition that will allow them to earn above-average profits over the long term.
Each investment is made with the long term in mind though, so the managers believe the initial price paid is less important to overall returns than the company's ability to grow earnings and profits over the long term. The managers benefit from the support of a knowledgeable team, and we think their stock picking skills have the potential to drive returns in the future.
Legal & General UK index
To cover all bases – and whatever the Chancellor announces, we think the Legal & General UK index is a good way of gaining broad exposure to the wider UK market. The fund aims to track the performance of the FTSE All-Share Index through full replication.
It does this by investing in all the stocks in the index and in the same proportion, helping the fund closely match the performance of the benchmark. Given Legal & General’s size, experience and expertise running index tracker funds, we expect the fund to continue to track the index well in the future.”
Article by Joseph Hill, Senior Investment Analyst, Hargreaves Lansdown
