Talking Point 

Looming Brexit deadline an opportunity for UK equity investors

Looming Brexit deadline an opportunity for UK equity investors

Advisers have said clients should be exposed to UK equities as the deadline for the UK’s departure from the EU nears.

According to the latest FTAdviser Talking Point poll, 77 per cent of advisers thought being invested in UK stocks was an opportunity, while a mere 5 per cent said clients should avoid having any exposure to the asset class in portfolios.

But Dennis Hall, chief executive and chartered financial planner at Yellowtail Financial Planning, warned against being too heavily skewed towards UK companies.

"I don’t think any investor should be heavily weighted to the UK regardless of which way the Brexit vote went," he said.

"Clients have not specifically expressed uncertainty about UK equities, we have weaned them away from a UK-centric portfolio bias, and clients tend to have portfolios that are closer to a global market cap-weighted portfolio."

He added: "In any case, we tend to take a 20 to 30-year view and encourage clients to extend their thinking beyond the short term, which also means a large-cap bias isn’t necessary."

The poll results showed only 8 per cent of advisers thought clients should be allocated to UK small-caps, while 10 per cent said they should have exposure to larger UK stocks. 

Ken Wotton, manager of the Livingbridge UK Multi Cap Income fund and the UK Micro Cap fund, suggested: "Small and micro-cap companies, which can display more attractive valuations compared to larger cap peers, are potentially well-positioned to mitigate any headwinds as Brexit uncertainties mount. 

"Due to their size they can often be quite nimble, and it may be easier for them to react at pace to the risks and opportunities going on around them."

He noted companies of this size often operated in less cyclical areas of the market. 

However, Peter Elston, chief investment officer at Seneca Investment Managers, admitted it was "hard to position for Brexit". 

"As with the [referendum] vote itself, a negative outcome could see mid-caps sell off more than large-caps, which may well provide a buying opportunity," he said.

The Adviser Centre reported in July the UK market lagged its developed market peers but that larger caps "broadly outperformed mid and smaller cap companies".

Read on demand the Talking Point debate on UK equities post-Brexit here.

eleanor.duncan@ft.com

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