By Jean-Baptiste Andrieux, Reporter, Trustnet, 14 May 2024:
UK equities have been notoriously out of favour with both domestic and international investors for several years. Although the FTSE 100 has rallied in recent times, it is difficult to tell whether the tide is finally turning.
All we know for now is that investors have been consistently withdrawing money out of UK equities, with £8bn of outflows in 2023 alone.
Given that investment trusts are listed on the London Stock Exchange, investors might wonder whether – and if so, how – it impacts their holdings..
UK small- and mid-caps have been more affected by the exodus out of UK equities than their large-cap peers, which has caused some to worry that the asset class may be incrementally disappearing..
Investment trusts have a different natural investor base compared to ‘normal’ UK equities, predominantly composed of domestic retail investors. This nuance means that they have not been as adversely affected by the shift away from the domestic market by UK pension schemes and the lack of interest in UK equities among foreign investors.
James Carthew, head of investment companies at QuotedData, said: “What we don’t have is a general problem of UK investors wanting to asset allocate away from the UK, because the investment companies market is set up to allow them to do that.
“Neither are we suffering from overseas investors shunning the UK, as they were never buyers of investment companies in the first place. One of the great failures of our EU membership is that there was never a proper single market for investment – so Brexit made no real difference to the investor base for investment companies.”
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