Ken Rayner, director at Rayner Spencer Mills, picks a selection of funds to look out for in the UK All Companies sector.
The UK All Companies sector is defined by the IMA as funds that invest at least 80% of their assets in UK equities which have a primary objective of achieving capital growth. The sector will generally form the core of most portfolios. For a UK investor it makes sense to hold a proportion of assets in this country’s stock market for several reasons:
- While there are strong arguments for global diversification and over time the UK may gradually become a smaller part of an investor’s portfolio, the UK stock market is still one of the largest and most well run.
- The UK market is well understood and it also offers access to a huge variety of companies as well as being able to reduce currency risk by holding sterling assets.
- Although the UK economy is gradually reducing its global influence in GDP terms, with the rise of the emerging economies, it still has access to some of the world’s leading companies and brands.
- There are many good investment funds and managers to select from in the UK, covering a range of capitalisation levels and investment styles that are not always available in other geographies.
Looking at the current outlook for the sector, the overall market picture has rotated again in the last quarter with the gains made in the first few months taken back by the increasing uncertainty in Europe.
Although the market was still marginally up, all those funds which benefited from an increase in the risk environment and holding cyclicality (such as banks and resource stocks) saw much of the gain eroded in April and May.
Home bias: How to build a UK portfolio
The situation in Europe is so fluid it is difficult to comment meaningfully on generic market positioning. One point to note is that a majority of fund managers expect further quantitative easing in Europe to support the peripheral bond markets and the banking system.
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