Rachel Reeves’ first Autumn Budget as chancellor has dominated headlines and speculation on what tax and pension changes we could see has been rife.
Reeves and her colleagues have talked at length about the £20bn black hole they’ve stumbled upon after arriving in Downing Street. Mooted targets for tax raids to fill the gap have led to jitters among investors.
HL’s own investor confidence survey* has shown sentiment towards investing in the UK stock market has dipped amid the uncertainty.
Investors’ initial enthusiasm for the potential stability offered by this new government has waned, and they now have less faith in their ability to grow the economy – but the impact of the Budget could change perceptions.
There’s a fine balance to be struck between resetting expectations and avoiding a self-fulfilling spiral of negative sentiment and weakening confidence.
In contrast, the message we’ve heard from the UK equity fund managers we’ve been speaking with has been upbeat.
*Survey of 2,000 people by Opinium for Hargreaves Lansdown in September 2024.
Should investors be positive about investing in the UK?
We believe there are lots of reasons to be positive about investing in the UK. At a macro level, inflation is back under the 2% target and interest rates are falling.
There have already been more takeover transactions announced in 2024 than in the whole of 2023, with almost half of these occurring in the FTSE 350.
And what’s more, these have been at an average of a 40% premium to the share price before the bid. This suggests that, in some pockets at least, there’s value in the UK market.
The majority of bidders for UK companies so far this year have come from overseas investors. A sign that if investors at home continue to shun the value on offer in the UK, then overseas investors might step in to take advantage.
If you’re looking to try and take advantage of the value on offer in the UK stock market, here are 3 fund ideas that could help.
This isn’t personal advice. All investments and any income from them can rise and fall in value, so you could get back less than you invest. Remember, yields are variable, and no income is ever guaranteed. If you’re not sure an investment is right for you, ask for financial advice.
3 UK fund ideas
Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
For more details on each fund and its risks, use the links to their factsheets and key investor information.
Artemis Income
We think the Artemis Income team are one of the best in the business and are well placed to make the most of UK income opportunities.
The experienced trio of Nick Shenton, Andy Marsh and industry stalwart Adrian Frost have over 80 years of investment experience between them and have developed a strong working partnership.
They mainly invest in large UK businesses, but will invest in some medium-sized companies when they find great opportunities.
These are companies they believe can pay a sustainable income through the market cycle, whatever the economic backdrop. These tend to be businesses with lots of reoccurring revenues.
This increases the chance they can retain and grow their customer base, profits, and therefore dividends over time.
We see this as a more conventional, core UK equity income fund that could work well alongside other asset classes in an income-focused portfolio.
At the time of writing, the fund yields 3.34%.
The fund takes charges from capital, which can increase the yield but reduce the potential for capital growth.
Sep 19 – Sep 20 | Sep 20 – Sep 21 | Sep 21 – Sep 22 | Sep 22 – Sep 23 | Sep 23 – Sep 24 | |
|---|---|---|---|---|---|
Artemis Income | -14.99% | 27.70% | -6.36% | 16.16% | 18.42% |
FTSE All Share | -16.59% | 27.89% | -4.00% | 13.84% | 13.40% |
Fidelity Special Situations
Manager Alex Wright employs a contrarian investment approach and invests in unloved large, medium-sized and higher-risk smaller companies.
Wright has over 20 years of investment experience and is supported by a large, well-resourced team of investment professionals at Fidelity.
Wright invests in companies that often go ignored by other investors. Maybe they've missed a profit target, or the management team made some unpopular decisions.
Either way, he must believe the company is on the road to recovery.
As it improves, its share price should rise as other investors recognise the change. As the price rises, Wright gradually takes profits and moves on to the next unloved opportunity.
The manager's focus on unloved companies differentiates it from many other UK-focused funds.
While investment styles go in and out of favour, we like that Wright has never deviated from his longstanding investment approach.
The manager has the flexibility to invest in derivatives which, if used, can add risk.
Sep 19 – Sep 20 | Sep 20 – Sep 21 | Sep 21 – Sep 22 | Sep 22 – Sep 23 | Sep 23 – Sep 24 | |
|---|---|---|---|---|---|
Fidelity Special Situations | -22.51% | 46.97% | -9.55% | 14.51% | 19.66% |
FTSE All Share | -16.59% | 27.89% | -4.00% | 13.84% | 13.40% |
FTF Martin Currie UK Mid Cap
The fund is managed by UK small and mid-cap expert Richard Bullas, who has a has a strong track record and the support of an experienced team at Martin Currie.
He invests the fund in medium-sized companies within the FTSE 250, often considered the ‘sweet spot’ between company growth potential and maturity.
It’s home to some great domestic companies and also those that do business internationally.
Bullas and his team hunt for businesses with strong growth potential.
Their process centres around two key pillars – quality and valuation. This sets a high bar for companies to make it into the fund and aims to reduce three key risks – business, financial and management.
Companies are sold if they graduate into the larger FTSE 100 by growing in value.
While the fund mostly invests in medium-sized companies, Bullas can also invest in smaller companies, which adds risk.
The fund could be a useful option as part of the UK portion of an adventurous portfolio. It could also work well alongside funds investing in large or higher-risk smaller UK businesses to achieve broader UK stock market exposure.
Sep 19 – Sep 20 | Sep 20 – Sep 21 | Sep 21 – Sep 22 | Sep 22 – Sep 23 | Sep 23 – Sep 24 | |
|---|---|---|---|---|---|
FTF Martin Currie UK Mid Cap | -18.25% | 41.06% | -29.32% | 15.81% | 16.61% |
FTSE 250 ex ITs | -15.29% | 40.85% | -26.79% | 13.62% | 21.41% |