It is a curiosity of 2022 that, despite all of the negativity, the UK equity market is currently delivering a positive return.
Of course this is largely a function of the make up of the UK index, with exposure to mining companies and defensive stocks such as pharmaceuticals and consumer staples.
Yet the cyclical nature of the FTSE 100 tends to mean many investors view it as a "value" market, and one more likely to be exposed to the vagaries of the global economic cycle than certain others.
In that context, we thought we would take a peek at the defensive portfolios of the allocators we cover, to see how they viewed UK equities from a defensive perspective.
We found the average allocation in a defensive portfolio was 7.8 per cent, which can be seen in the context of the average allocation to all equities being 23.3 per cent.
Therefore UK equities make up about 34 per cent of total equity exposures in cautious portfolios compared to 27 per cent in balanced portfolios which - as can be seen on the graph below - shows allocators still see them as a place of safety.
We have mentioned before that the average UK exposure in balanced portfolios has been falling for some time. And readers will be well aware of the tidal wave of outflows which UK equity funds have been experiencing in recent years.
But the issue is obviously more nuanced than this.
The largest exposure to UK equity funds is Close Brothers, with a stonking 19 per cent (though for context they are very keen on equities generally and have 47 per cent of their defensive model in the asset class) followed by Evelyn Partners Active MPS range, which has 12.4 per cent of its 28 per cent equity allocation in UK funds.
At the other end of the spectrum, Invesco has 1.3 per cent allocated to UK equities, and M&G Wealth has an allocation of 3.75 per cent, which is marginally higher than the 3 per cent it has allocated to US equity funds.
Wise has zero allocated to UK equity funds.
Two allocators also have exposures to UK small cap funds in their cautious portfolios, which is arguably an even bolder call given the small and mid-cap markets much greater exposure to the UK economy than that of its large cap counterpart.
Given its heritage in small caps, it is perhaps not surprising that Liontrust is one of the firms with small cap exposure, at 1.3 per cent of its cautious portfolio (indeed Liontrust is one of the few DFMs to have a specific small cap allocation in most regions).
Progeny is the other firm with some small cap exposure in its cautious portfolio, at less than 1 per cent.
Looking across all of the portfolios we cover, the most widely-owned UK small cap fund across all risk levels is Tellworth UK Smaller Companies which is run by the former Schroders managers Paul Marriage and John Warren.
This fund is held in the portfolios of three of the allocators we cover, as is the Chelverton UK Equity Growth fund.
UK smaller companies is objectively one of the cheapest asset classes right now, and 2023 will doubtless reveal whether it falls into the 'cheap', or 'cheap for a reason' category.