The start of a new year is always a natural point to look forward to what’s ahead, but also to reflect. As we reflect on 2024, there was a mixed bag for UK investors to digest.
Smaller companies were the best performing part of the UK market, delivering returns of 13.78%*, followed by larger companies, represented by the FTSE 100, with a return of 9.66%.
Medium-sized companies lagged their smaller and larger counterparts, but still delivered a respectable return of 8.14% during the year.
From a style perspective, 'value' just edged ‘growth’ investing, with the FTSE UK Value index returning 11.00%, just ahead of the 10.48% return from the FSTE UK Growth index.
This article isn’t advice. Investments and any income they produce will rise and fall in value, meaning you could get back less than you invest. If you’re not sure if an investment is right for you, ask for financial advice. Remember, past performance isn’t a guide to the future, yields are also variable, and no income is ever guaranteed.
UK stock market performance
Annual percentage growth
Dec 19 – Dec 20 | Dec 20 – Dec 21 | Dec 21 – Dec 22 | Dec 22 – Dec 23 | Dec 23 – Dec 24 | |
|---|---|---|---|---|---|
FTSE 100 | -11.55% | 18.44% | 4.70% | 7.93% | 9.66% |
FTSE 250 | -4.55% | 16.90% | -17.39% | 8.03% | 8.14% |
FTSE Small Cap ex IT | 1.65% | 31.26% | -17.31% | 10.37% | 13.78% |
FTSE UK Value | -17.62% | 19.03% | 8.83% | 10.09% | 11.00% |
FTSE UK Growth | -3.37% | 16.67% | -3.90% | 6.71% | 10.48% |
Fallout from the Autumn Budget
The 2024 Autumn Budget was the first opportunity for the new Labour government to set the wheels in motion on delivering on their objective to accelerate economic growth.
The general consensus is that what was delivered was a long way from that.
The verdict from the Office for Budget Responsibility, the UK’s official independent forecaster, is that the Budget won’t boost the economy over the next five years.
Tax rises worth £40bn were announced with businesses bearing the brunt, at least in the short term. Notable elements included a hike in the level of National Insurance companies will need to pay for their employees, alongside a rise in the minimum wage. While higher taxes on capital gains will impact individuals.
Early analysis suggests lots of companies intend to pass on the higher costs they’re faced with to their customers through price rises. Raising prices risks fuelling inflation, which would likely delay the rate at which the Bank of England can cut the base interest rate – this could harm investor sentiment.
Looking ahead to 2025, one of the key things on investor’s minds will be weighing up what affect the Autumn Budget might have on company prospects. However, it’s likely to be some time before we see the true impact of these measures.
Our advisers can help you understand what the Autumn Budget could mean for your finances and adjust your financial plan post-Budget.
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.
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, managed by Alex Wright.
Wright's contrarian approach and focus on unloved companies differentiates the fund from lots of its peers. He’s well supported by co-manager Jonathan Winton and Fidelity’s extensive analyst team and we think the fund has good growth potential over the long term.
The fund invests in smaller companies and the manager has the flexibility to invest in derivatives which, if used, can add risk. This fund has one of the highest ESG risk profiles of the 100 funds under research coverage. The companies within the fund could therefore face increased regulatory scrutiny, reputational damage, and operational challenges, potentially impacting the fund's future performance.
The weakest performer of our selections in the UK Growth sector was Liontrust UK Growth. It’s co-managed by Anthony Cross, Victoria Stevens and Matthew Tonge – a team we think have the range of skills and expertise to do a good job for investors.
The fund invests less in financials and defensive consumer-related companies and this proved to be a headwind over the year. Please note, the fund invest in Hargreaves Lansdown plc.
This fund also invests in smaller companies and the manager has the flexibility to invest in derivatives which, if used like smaller companies can add risk. As of 20/11/2024, this fund invests 13.39% of its assets in companies involved with the extraction of oil, gas or coal. This could leave the fund vulnerable to fluctuations in commodity prices, regulatory changes aimed at reducing carbon emissions, and potential shifts in consumer preferences towards sustainable alternatives.
Annual percentage growth
Dec 19 – Dec 20 | Dec 20 – Dec 21 | Dec 21 – Dec 22 | Dec 22 – Dec 23 | Dec 23 – Dec 24 | |
|---|---|---|---|---|---|
Fidelity Special Situations | -11.99% | 23.70% | -0.47% | 6.26% | 16.41% |
Liontrust UK Growth | -8.26% | 20.95% | -1.09% | 4.71% | 4.62% |
FTSE All Share | -9.82% | 18.32% | 0.34% | 7.92% | 9.47% |
UK Equity Income
The best-performing fund in the UK Equity Income section of the Wealth Shortlist over the last year was Artemis Income.
We think the experienced trio of Nick Shenton, Andy Marsh and industry stalwart Adrian Frost are among of the best in the business with a combined 70 years’ investment experience.
At the time of writing, the fund yields 3.63%.
The fund takes charges from capital, which can increase the yield, but reduce the potential for capital growth.
The worst performing of our UK Equity Income fund selections was Janus Henderson UK Responsible Income.
The fund doesn’t invest in companies with significant involvement in areas some investors consider unethical. Instead, it mainly focuses on large and medium-sized dividend-paying companies in the UK.
The manager has the flexibility to invest in higher-risk smaller companies too.
The fund’s investments in asset managers Schroders and M&G and bank Barclays have been the biggest drags on performance over the year.
Annual percentage growth
Dec 19 – Dec 20 | Dec 20 – Dec 21 | Dec 21 – Dec 22 | Dec 22 – Dec 23 | Dec 23 – Dec 24 | |
|---|---|---|---|---|---|
Artemis Income | -6.74% | 16.17% | 0.40% | 9.78% | 15.12% |
Janus Henderson UK Responsible Income | -6.38% | 14.03% | -4.93% | 13.10% | 3.82% |
IA UK Equity Income | -10.79% | 18.41% | -1.93% | 7.03% | 8.82% |
FTSE All Share | -9.82% | 18.32% | 0.34% | 7.92% | 9.47% |
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 Artemis UK Smaller Companies. We added the fund to the Wealth Shortlist in December 2024.
The fund invests in smaller companies listed on the UK stock market and its valuation-focused approach means the fund invests differently to many of its peers in the IA UK Smaller Companies sector.
We think fund manager Niznik has the experience, skill and support to deliver good long-term returns to patient investors, although there are no guarantees.
The worst-performing fund in the UK Small and Medium-sized section of the Wealth Shortlist was the FTF Martin Currie UK Mid Cap fund, managed by Richard Bullas.
The fund invests in medium-sized companies, often considered the ‘sweet spot’ between company growth potential and maturity. Through 2024, its investments in Watches of Switzerland and Pets at Home have been among the biggest detractors from returns.
Investing in smaller companies is higher risk – investors should invest for the long term and be prepared for volatility along the way. The fund is concentrated which also adds risk.
Annual percentage growth
Dec 19 – Dec 20 | Dec 20 – Dec 21 | Dec 21 – Dec 22 | Dec 22 – Dec 23 | Dec 23 – Dec 24 | |
|---|---|---|---|---|---|
Artemis UK Smaller Companies | -16.55% | 29.95% | -8.29% | 4.85% | 9.35% |
IA UK Smaller Companies | 7.26% | 22.82% | -25.67% | 0.22% | 6.30% |
FTF Martin Currie UK Mid Cap | -14.02% | 19.30% | -19.60% | 9.72% | -0.61% |
FTSE 250 ex ITs | -8.48% | 18.36% | -18.44% | 10.03% | 8.42% |