No IPOs for UK managers

Additionally, academics have proven that the size of IPO underpricing is cyclical; for example, at the height of the dot-com bubble, the average IPO was underpriced by more than 50 per cent.

For UK equity active managers, there was little uncertainty that this IPO mispricing effect would work again, given the small appetite for UK equities among global investors.

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With little conviction on alpha being generated from the IPO market, UK equity active managers turned to the mergers and acquisitions market, as the discounted valuations for UK companies offered fertile ground for overseas companies to harvest.

Charles Younes is research manager of FE