UK investors attempting to flee to foreign markets or 'safe UK stocks' to escape further uncertainty have missed the boat, fund manager Richard Penney has warned.
The manager of the £31m Crux UK Special Situations Fund told FTAdviser that while it is understandable many retail and institutional investors might wish to avoid market uncertainty in the UK by looking elsewhere, it was probably "too late" for them to benefit from such a move.
He explained: "From a fund buyer's perspective, it is a crowded market, reflecting that everybody has had the same strategy for two to three years". While there have been investor outflows, this has been happening for two to three years, meaning the pricing of the UK is now roughly 15 per cent to 20 per cent cheap or "lowly priced relative to other markets".
Mr Penney said: "While we are a bottom-up investment manager, it has been macroeconomic factors that have been driving everything.
"The flight overseas or to defensive stocks has been going on since 2016, but this is now an expensive play for anyone seeking to look for the safety of these overseas earnings", he added, stating it was probably "too late".
However, he said there were opportunities for those looking for growth: "The key is to find some businesses that are cheap, which are not particularly affected by Brexit, and sometimes you can find some growth and quality stocks that are possible to benefit from."
Mr Penney also told FTAdviser he has been drilling further down into the small-cap sectors to find stocks, such as tech companies, which are "energetic, vibrant and capable of a few years' growth, which are now reasonably priced".
And, while his fund had 8 per cent in cash, he stressed this was not specifically because of any fears over Brexit uncertainty.
According to Mr Penney: "We have the cash ready there to take advantage of any special situations out there, but actually at the moment there are investors who are making redemptions and creating forced sellers, and potentially there could be rights issues in some of the smaller companies we look at, so it is important that we have the firepower there in the fund to take advantage of all that."
The fund, which was launched in 2018, has returned 12.5 per cent over the past year while the IA UK All Companies sector has returned 8.9 per cent.