Russell Taylor: Investors need to rethink Brexit strategies

Russell Taylor: Investors need to rethink Brexit strategies

Notoriously, investors rarely react to future threats – until those threats have become realities, at least.

So far this year, markets have not responded significantly to the developing trade war, or America’s withdrawal as the leader of the western world, nor even the probability that there will be no deal for Britain with the EU.

Strong UK focus

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Ignoring Brexit has paid off so far for many UK-based investors. New research from the Association of Investment Companies (AIC) reveals the top 20 most consistent investment companies over the past 10 years have a strong UK focus. Member companies were ranked by discrete annual returns and outperformance, benchmarked against the overall average investment company. 

Seven out of the 20 in this year’s list are investment companies with a UK focus. This is more dominant than last year, when only five UK focused investment companies featured. Less surprisingly, the UK smaller companies sector is home to the majority of those UK-focused trusts.

Investment companies from the global sector are the second most commonly featured in this year’s list. Newcomers this year are Herald Investment Trust and Polar Capital Technology, both discussed in previous columns.

Annabel Brodie-Smith, communications director of the AIC, says: “It may be surprising that UK-focused companies dominate the most consistent outperforming investment companies list over the past 10 years. Concerns about Brexit and a UK economic slowdown are ever present, but UK investment companies, and particularly the UK smaller companies sector, have performed consistently well.

“This year, 11 investment company sectors are represented in the list, illustrating the wide range of investment company sectors available for investors to choose from. Investors should bear in mind that performance is just one criterion to consider when researching investment companies; they also need to look at other criteria, including portfolio composition, gearing, discounts and charges. Investors usually focus on the latest top performers, but consistent long-term past performance is key when considering potential investment companies.”

Britain and the EU

Brexit continues to loom large, however. The prime minister may have coerced what remains of her warring partners into a semblance of unity, but some of those 12 hours at Chequers could have more usefully been employed reading Sir Con O’Neill’s report on Britain’s European Economic Community (EEC) entry negotiations of 1972. Written for ministers right after the event, it was released to the public in 2000. During the 1970s, business and the political elite were terrified Britain was falling behind the six founding EEC members – Belgium, France, Italy, Luxembourg, France and West Germany – in economic growth, productivity and export success.

So while the feeling was that the UK had no choice but to join, the sense was that the size of the UK and Irish economies in relation to the six, together with the goodwill that still existed from victory in the second world war, meant they would be given favourable terms. Not a bit of it.