UK equities tipped as top performer for 2020

UK equities tipped as top performer for 2020

The UK has been tipped as the region set to produce the best stock market return throughout 2020 by investment trust managers.

The Association of Investment Companies polled its member managers in November and found a third (33 per cent) thought the country had the best prospects over the coming year.

This was ahead of Asia Pacific ex Japan (19 per cent) and Europe and the US, which received 10 per cent of the votes each.

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UK equities have had a tough time over the past few years as Brexit uncertainty has stifled optimism and decision-making in the market, but managers believed the UK had strong prospects over a five-year view.

Nearly a quarter (24 per cent) of those polled thought it was the most promising region over the next five years, just behind emerging markets which bagged 29 per cent of those surveyed. The US was the third most popular choice with 19 per cent of the votes.

For 2020, fund managers were most optimistic about interest rates remaining relatively low (24 per cent) followed by improving global growth (14 per cent).

Even with Brexit and General Election uncertainty, managers were bullish about Real Estate Investment Trusts. REITs were the joint most popular sector — alongside Software and Computer Services — as both secured 14 per cent of the votes for the sectors likely to perform best next year.

Annabel Brodie-Smith, communications director at the AIC, said: “Despite 2019 being a year of Brexit and political uncertainty, it’s promising that investment company managers are most optimistic about the prospects for the UK next year.

“Investment company managers do not have a crystal ball and no-one knows what will happen next year, so investors need to focus on building a balanced portfolio which can meet their investment needs over the long term and not worry about the short-term unknowns of 2020.”

Laura Foll, co-manager of Lowland Investment Company and Henderson Opportunities Trust, said the UK was likely to become “harder to ignore” if there was some resolution on Brexit following the general election.

She added: “An interesting theme this year has been a substantial pick-up in mergers and acquisitions interest. This is a trend we expect to accelerate on any resolution.”

Fund managers also thought the industry needed to rebuild investor trust following the saga surrounding former-star fund manager Neil Woodford.

Andrew Bell, CEO of Witan Investment Trust, said: “If there is a fly in the collective soup it attracts all the attention, undermining the reputation of soup.”

Alasdair McKinnon, manager of the Scottish Investment Trust, thought the industry could rebuild trust by making sure they communicated their mandates clearly and “stuck to their knitting”.