InvestmentsMay 26 2017

Funds increase UK exposure

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Funds increase UK exposure

Global equity funds have deepened their exposure to the UK over the past six months, despite uncertainty over Brexit and the general election.

Global equity funds have deepened their exposure to the UK over the past six months, despite uncertainty over Brexit and the General Election.

Copley Fund Investment Research produced a report into 156 global equity long only funds, showing that the UK is the largest country overweight, at 2.5 per cent above benchmark weightings taken from the MSCI ACWI.

The focus on the UK reverses a trend that has seen UK weightings drift lower over the past six years.  That trend began to reverse in quarter three last year.

UK consumer stocks including British American Tobacco, Reckitt Benckiser and Unilever are the largest overweight holdings, suggesting that investors are taking advantage of global sales at a lower price due to the weak pound,

“I would say there are two key drivers here,” said Steven Holden, the founder  of Copley. 

“Firstly, the UK stocks mentioned below generate sales globally, so with the GBP devaluation investors are able to buy global exposure at a discounted price. 

"Secondly theTrump effect has seen investors cutting positions in US, specifically US health care stocks, some of this has found its way to the UK.”

The FTSE 100 index has rallied 20 per cent since the eve of the Brexit vote last June, It reached a new high this month.

The FTSE 250 index has also hit a record high this month after rising 17 per cent since the eve of the Brexit vote, despite being more domestically focused than the global FTSE 100.