As the UK continues to be distracted by the noise generated by the Brexit debate – and the end of the ISA season approaches along with the Brexit deadline, UK investors remain net buyers of UK-listed shares, according to data from Barclays Smart Investor. However, there is also less interest in UK-focused funds, as the Barclays report on popular investment funds has revealed.
As discussed in the February Armchair Trader podcast, UK investors are now looking more closely at other parts of the world, and in January were buying funds that had Asian, US and global mandates, as well as technology sector specialists.
According to Will Hobbs, Chief Investment Officer at Barclays Investment Solutions, UK investors are sensibly pursuing a strategy of eliminating country-specific risk by diversifying their fund investments into other parts of the world. The strengthening pound also means that non-sterling assets are getting cheaper: while this was not the case in January, the prospect of a delayed Brexit has the scope to provide investors with more bang for their buck as we progress through ISA season.
Hobbs also says that the gap between the dividend yield of the FTSE 100 and the UK long bond yield is at its widest in 118 years, which means UK blue chips are looking cheaper than ever.
Of the interest in technology funds, he adds:
“Technology specialists represent a good way for investors to navigate the mid-cap technology sector. This has a high level of creative destruction if you get your trades wrong, so it can be worth paying for someone else with specialist knowledge to do that for you.”
Scottish Mortgage still the favoured investment trust
The favoured investment trust was still the giant Scottish Mortgage Investment Trust. City of London Investment Trust did knock Scottish Mortgage off its top slot for one week in January however.
The new Terry Smith product, the Smithson Investment Trust, has fallen out of the top 10 tier for the first time since it launched back in October.
Other widely purchased investment trusts included Primary Health Properties PLC, 3i Group PLC, Finsbury Growth & Income Trust and the Tritax Big Box REIT.
“For UK investors the Brexit noise is deafening right now,” Hobbs observes. “However, the cost of assembling a diversified portfolio has plunged compared with 20 years ago. Investors can now only pay for active management where they feel it adds value.”
The self-directed ISA product is now more sophisticated than ever: investors can combine actively managed funds, ETFs and stocks in the same portfolio, using active funds for those areas – like mid-market technology – where they feel they might not have the expertise.
Check out the current range of self-directed ISA products here.