UK shares have been out of favour for most of the past decade but international investors are returning, according to Ed Legget who runs the £1.4bn Artemis UK Select fund.
Legget was speaking on the latest in the series of Artemis Despatches videos, brought to you by FTAdviser.
During 2021 there were outflows of £4.4bn from UK equities funds, which was this asset class's worst performance since 2018.
Overall, since the UK voted to leave the European Union in June 2016 there have been outflows of £21bn from UK equity funds.
But Legget said he could see signs that things were changing.
He said: “Most asset classes, from equities and bonds to buy-to-let property, have done well for the past decade, but UK equities just haven’t participated in that.
"A lot of the reason for that relative underperformance has been the sector mix of the FTSE, which has lots of banks and commodities, which were not in demand in a world of low interest rates and low inflation.
"But a few things are changing now. The higher inflation we are all seeing, and indeed experiencing, means that financial assets and commodities are coming back onto investors' radars. And that is bringing back the international investors.”
Legget said that in times of severe uncertainty, such as now, the appropriate response might be to stick with a two- or three-year time horizon.
He added: "Over that sort of timeframe, I would expect the pressure to ease in terms of inflation.”
Over the past three years, Legget's fund has been one of the best-performing in the UK All Companies sector, returning 39 per cent compared to an average 17.5 per cent for the sector.
david.thorpe@ft.com
