24/04/2024
It’s been a challenging couple of years in the UK; various geopolitical events, persistent inflation and rising interest rates have created an uncertain investment landscape. However, the recent bounce-back in the markets has led to a growing sense of optimism among British intermediaries and their clients.
Events such as the Russia/Ukraine War and Liz Truss’ mini-budget shook markets and left financial intermediaries and their clients anxious. Furthermore, with UK funds experiencing their worst net outflows on record in 2023, according to the Pridham Report, it has felt for some time as if there is no light at the end of the tunnel.
However, findings from the latest wave of Research in Finance’s quarterly UK Advisory Study (UKAS), conducted in February/March 2024 with 120 discretionary fund managers (DFMs) and 161 investment advisers (IAs) suggest that there is growing optimism in the UK investment space.
DFMs and IAs were asked if they had noticed a change in their clients’ attitude to risk. For the first time in over two years, both groups felt that clients were willing to take on more risk.
With markets proving to be relatively resilient since November 2023, it appears that clients are prepared to put more risk on the table to achieve the returns that have eluded them over the past couple of years.
So where are DFMs and IAs planning to allocate in these more promising market conditions? It seems equities are garnering the most interest. In the latest wave of UKAS, 58% of DFMs and 40% of IAs stated they plan to increase their equity allocations. Coupled with 33% of DFMs and 27% of IAs expecting to decrease their allocations to cash/cash equivalents, it appears that intermediaries are more convinced of the value and opportunity that equity markets are offering.
Based on our in-depth interviews with DFMs, it seems that UK equities specifically are an area of interest. There is a growing sense that the UK is undervalued and an area of opportunity.
We’re overweight in the UK, but within that we’ve got a value tilt. We skew to those small and mid-cap companies where some of the valuations are incredible” – DFMs
Coupled with the FTSE 100 reaching a record high on the 22nd of April 2024, we could be seeing the green shoots of a recovery in demand for UK equities.
How Research in Finance can help
Now in its tenth year, UKAS is a quarterly research study that gives a comprehensive analysis of the competitive UK retail landscape. It gives insight into current investment appetite of the most influential intermediaries and their clients, plus expectations going forward.
We also offer bespoke studies. For more information, please get in touch with Mick Hrabe or Richard Ley. You can also call us on +44 (20) 7104 2235.
