In case you missed it: UK Fund Manager Interviews

The quick read:

  • The UK market is relatively cheap compared to other markets
  • Large UK companies that our fund managers invest in are international businesses
  • UK stocks have already benefitted from the recent market ‘rotation’, and are well-placed to continue doing so
  • Responsible investing is front of mind for all our fund managers

Over the last few weeks, we have been publishing a series of interviews with our UK equity fund managers. In wide-ranging conversations, they have discussed some of the opportunities available to investors in UK businesses, as well as how recent events shape the outlook for the UK market.

Here are some highlights:

Why price matters more than politics

The uncertainty caused by the Brexit referendum of 2016 has acted as a drag on the share prices of many UK companies in recent years. However, when it comes to selecting companies to invest in, our fund managers are focused on making investments at prices that are more likely to generate future returns:

“We’ve had a referendum, elections, Brexit negotiations, the implementation of Brexit, and a global pandemic. So, it’s been wave after wave of bad news. But the good news is that the best predictor of future returns is not political stability, or the headlines, or the macro outlook. It is the price you pay for an investment.”

Kevin Murphy of Schroders, which manages the UK element of the St. James’s Place Managed Growth fund.

In addition, UK companies presently trade cheaper than many of their international counterparts, which creates an opportunity for investors:

“Data show that over the last 50 years or so the UK has on average traded at about a 17% discount to the stock market for the rest of the world. And today, that discount is 45%. So, you literally have to go back to the 1970s to find a time that the UK market has been as cheap as it is today. And I would say that’s a very encouraging starting point.”

Ian Lance of RWC Partners, managers of the St. James’s Place Equity Income fund.

Large UK companies are high-quality, international businesses

It’s important to remember that many of the large UK businesses our fund managers invest in are international in their scope. Many of them earn a significant proportion of their revenues from abroad.

“We’re not investing in the UK economy and the ‘coiled spring’. We’re investing in international stocks, which happen to be listed in the UK.”

Richard Colwell of Columbia Threadneedle, co-manager of the St. James’s Place UK Equity fund

Similarly, selecting companies with strong competitive advantages helps to insulate investors from political or economic uncertainty.

“The type of companies that we’re looking for are those that we think can thrive in these difficult environments. We’re looking for businesses with sustainable competitive advantages, with clear barriers to entry.”

Luke Chappell of BlackRock, co-manager of the St. James’s Place UK & General Progressive fund.

The recent market ‘rotation’ may continue benefitting UK investors

Since successful vaccine developments were announced last year, stocks in sectors that suffered the most during the early stages of the pandemic have begun to enjoy a resurgence. Since last November, so-called ‘value’ stocks have begun to perform well compared to their ‘growth’ counterparts.

This has helped the UK market to enjoy good returns in the first quarter of this year and may continue to do so. Ian Lance of RWC Partners is reminded of the year 2000, which prompted a period of strong returns for ‘value’ stocks:

“Back in 2000, we had a situation where one group of stocks attracted the narrative that they were fantastic quality stocks, that they could grow forever, and therefore valuation was almost irrelevant. And people sold what were deemed ‘old economy’ stocks against that. I would say that the conditions that existed back then are very similar to the conditions that exist today. In other words, we have that same narrative, that valuation is irrelevant for some of these growth stocks. And it has pushed down the valuations of what are deemed value stocks to phenomenally attractive levels. We think that the valuation differential between those two groups today is probably more attractive than we’ve seen in our entire lifetimes.”

Ian Lance of RWC Partners, managers of the St. James’s Place Equity Income fund.

Of course, by diversifying their investments, fund managers stand to benefit from either side of the coin. By selecting stocks in both the ‘growth’ and ‘value’ camps, investors can build portfolios that can thrive regardless of which particular investment style is the flavour of the moment:

“The principal thing is to concentrate on the breadth of opportunities in the UK market, rather than narrowing it down to ‘growth’ or ‘value’.”

Adrian Frost of Artemis, managers of the UK & International Income fund.

Responsible investing is front of mind for our fund managers

As responsible investors, our fund managers take into account a range of environmental, social and governance (ESG) factors. Incorporating these processes into their investment decision-making means they can use your funds as a force for good, which, crucially, makes investment sense:

“We’re seeing an extraordinary level of demand from our clients, and an amazing response from companies, around ESG. These are processes that we’ve embedded over many years and implemented into our research.”

Luke Chappell of BlackRock, co-manager of the St. James’s Place UK & General Progressive fund.

And, finally, by investing in leading businesses, our fund managers can use their influence to help drive meaningful, long-term change:

“These days we see ourselves as real leaders in terms of stewardship and governance. We’re owners of businesses, and, therefore, we do get involved in things like management changes to affect change, to try and realise what we think is attractive, intrinsic value.”

Richard Colwell of Columbia Threadneedle, co-manager of the St. James’s Place UK Equity fund

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.

Where the views and opinions of our fund managers have been quoted these are not necessarily held by St. James’s Place Wealth Management or other investment managers and are subject to market or economic changes. This material is not a recommendation, or intended to be relied upon as a forecast, research, or advice.


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