Labour won 412 of the 650 seats in the 2024 General Election and returned to government for the first time in 14 years. Market reaction was relatively muted given Labour’s victory was largely expected.
There were a number of pledges in Labour’s manifesto that could impact investors.
New Prime Minister Keir Starmer committed to keeping the triple lock pension and ruled out increasing income tax, National Insurance and VAT for most people. Although he hasn’t ruled out changes to capital gains tax (CGT) or pension tax relief.
This article isn’t personal advice. If you're not sure if an investment is right for you, ask for financial advice. All investments and any income they produce can rise and fall in value, so you could get back less than you invest. Past performance isn’t a guide to the future.
Calmer waters ahead?
After a chaotic couple of years in Westminster, there’s optimism that the UK could be set for some stability. Investors don’t like uncertainty. So, a stable government with a much lower risk of a sudden change of political direction means there’s one less thing to worry about.
The UK economy is also on an upward trend. UK inflation has finally fallen back to target – prices rose by 2% for the year to June 2024.
This is good news, but parts of the economy are still seeing significant price rises.
Some areas of the services sector, from restaurants to hairdressers, are still seeing prices rise quicker than the headline level of inflation. Because of this, the Bank of England are now expected to cut rates just once this year from their current level of 5.25%.
The UK economy is also growing faster than expected. Strength in services and housebuilding drove growth of 0.4% in May, sending the pound to its highest level against the US dollar in almost a year.
Has sentiment towards the UK market now troughed?
Investors are putting their money in the mid cap part of the UK stock market (representing medium sized companies), with three consecutive months of inflows. The first time this area of the market has seen inflows since November 2022.
Generally, smaller and medium-sized companies get a greater share of domestic revenues from UK consumers than bigger companies do. So, we think positive flows in this part of the market is a sign that investors are feeling more optimistic about UK prospects.
This comes on the back of lots of pessimism towards the UK from investors in recent years. For the last three years, funds investing in the UK have been the least popular with investors.
In 2021, funds in the IA UK Equity Income sector were the least popular, and in 2023 and 2022, the IA UK All Companies sector was the least popular. In fact, for eight of the last 10 years, UK funds have been the most disliked by investors. Recent data is showing that finally, things could be changing.
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How have the UK Wealth Shortlist funds performed?
Our Wealth Shortlist selections delivered mixed performance over the past year, and we tend to expect this from such a wide range of funds. Remember a year is a short timeframe, and most funds are designed to be held for the long term (at least five years).
Investing in funds isn’t right for everyone. Investors should only invest if the fund’s objectives align 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 long-term diversified portfolio.
For more details on each fund and its risks, see the links to their factsheets and key investor information.
UK Growth
The best performing fund in the UK Growth section of the Wealth Shortlist over the last year was the Fidelity Special Situations fund returning 19.08%*.
The fund is managed by the experienced Alex Wright, employing a contrarian approach and focusing on unloved companies which makes the fund different from some peers. Wright is a disciplined ‘value’ investor and has stuck to his style through thick and thin.
Ninety One UK Sustainable Equity was the weakest performer of our UK Growth Wealth Shortlist selections. The fund returned 5.14%, which is behind the FTSE All-Share index return.
The fund’s lack of exposure to energy companies, which have broadly performed well hasn’t helped and proved a headwind for performance.
The fund invests in companies the manager thinks are making a positive impact on society or the environment. Its positive impact approach makes it different to other funds in the IA UK All Companies sector, and to other responsible UK equity funds.
Annual percentage growth
Jun 19 – Jun 20 | Jun 20 – Jun 21 | Jun 21 – Jun 22 | Jun 22 – Jun 23 | Jun 23 – Jun 24 | |
|---|---|---|---|---|---|
Fidelity Special Situations | -19.58% | 36.00% | -1.51% | 5.72% | 19.08% |
Ninety One UK Sustainable Equity | 5.06% | 24.29% | -14.58% | 3.22% | 5.14% |
FTSE All Share | -12.99% | 21.45% | 1.64% | 7.89% | 12.98% |
UK Equity Income
The best performing fund in the UK Equity Income section of the Wealth Shortlist over the last year was the Artemis Income fund, returning 18.40%*.
We think the experienced trio of Nick Shenton, Andy Marsh and industry stalwart Adrian Frost are one of the best in the business with a combined 70 year investment experience.
At the time of writing, the fund yields 4.03%. The fund takes charges from capital, which can increase the yield, but reduce the potential for capital growth. Remember, yields are variable, and no income is ever guaranteed.
The worst performing of our UK Equity Income fund selections was Troy Trojan Income, which lagged the FTSE All-Share return, rising by only 6.52%.
The fund’s investments in wealth manager St James’ Place and chemical business Croda have been among the biggest detractors from performance.
We think the fund, managed by Blake Hutchins, invests in companies that aren’t as reliant on a strong economy to thrive. So, we expect the fund to hold up better than the index in falling markets, but lose ground in a rising market.
Annual percentage growth
Jun 19 – Jun 20 | Jun 20 – Jun 21 | Jun 21 – Jun 22 | Jun 22 – Jun 23 | Jun 23 – Jun 24 | |
|---|---|---|---|---|---|
Artemis Income | -10.70% | 23.18% | -0.21% | 8.24% | 18.40% |
Troy Trojan Income | -5.44% | 8.32% | -6.80% | 4.04% | 6.52% |
FTSE All Share | -12.99% | 21.45% | 1.64% | 7.89% | 12.98% |
UK Small & Medium-sized companies
The strongest performer in the UK Small and Medium-sized section of the Wealth Shortlist over the past year was the Legal & General UK Mid Cap Index fund, returning 15.54%*.
The fund invests in all the stocks from the FTSE 250 index, except investment trusts. The fund offers a purer exposure to UK businesses than a broader FTSE 250 index tracker and as a passive fund, it's a simple and low-cost option.
The worst performing fund in the UK Small and Medium-sized section of the Wealth Shortlist was the Amati UK Listed Smaller Companies fund, returning 7.71%.
The fund’s investments in data and analytics company YouGov and technology business Big Technologies have been among the poorer performers.
The fund is run by an experienced and well-resourced team and aims to invest in companies they think can grow faster than their competitors. The fund invests in smaller companies, which adds risk.
Annual percentage growth
Jun 19 – Jun 20 | Jun 20 – Jun 21 | Jun 21 – Jun 22 | Jun 22 – Jun 23 | Jun 23 – Jun 24 | |
|---|---|---|---|---|---|
Legal & General UK Mid Cap Index | -13.57% | 36.17% | -16.58% | 3.03% | 15.54% |
FTSE 250 ex ITs | -13.32% | 36.71% | -16.10% | 2.95% | 15.10% |
Jun 19 – Jun 20 | Jun 20 – Jun 21 | Jun 21 – Jun 22 | Jun 22 – Jun 23 | Jun 23 – Jun 24 | |
|---|---|---|---|---|---|
Amati UK Listed Smaller Companies | -1.95% | 46.21% | -21.37% | -14.38% | 7.71% |
FTSE Small Cap ex ITs | -12.29% | 65.20% | -14.64% | -0.35% | 18.54% |