The signing of a post-Brexit trade deal has “removed a big uncertainty” from the UK stock market, according to Nick Train, who runs the £2bn Finsbury Growth and Income investment trust, among other mandates.
It also means the gains made by UK equities this year are justified.
The FTSE 100 has gained about 2.5 per cent since the start of the year, and also made gains in the period between Christmas and New Year.
In his latest update to shareholders in the trust, Mr Train wrote: “I am always cautious about making any investment call based on macro-economics or politics – because my track record in doing so is poor.
"Nonetheless in recent years, as a longstanding practitioner in the UK equity market I have had a strong sense that the uncertainty surrounding the UK’s protracted divorce from Europe has discouraged global investors from allocating to the London stock market and positively encouraged hedge funds to short London shares and go long of other markets without the same political and currency worries.
Would Remy’s share price have been up 48 per cent in 2020 if it were a London-listed security? Nick Train"Certainly, we have watched wider and wider divergences develop between the share price performance and the valuations of similar UK and non-UK companies.
"For instance, would Remy’s share price have been up 48 per cent in 2020 if it were a London-listed security? Would Diageo have been down 10 per cent, except for its UK domicile? We expect not.
"There are many other examples and for us, therefore, it is no accident that the UK stock market has rallied since the Brexit deal was announced. A big uncertainty has been removed and investors can now shop for bargains.”
Mr Train has at present a focus on luxury goods companies and what he calls “digital leaders” listed on the UK market.
The Finsbury Growth and Income Trust has returned 69 per cent over the five years to January 14, 2021, compared with the 29 per cent returned by the average trust in the AIC UK Equity Income sector in the same time period.
david.thorpe@ft.com
