UK equities tipped as top performer for 2020 in AIC fund manager poll

UK equities tipped as top performer for 2020 in AIC fund manager poll

The UK stockmarket is most likely to produce the best returns for equity investors in 2020, according to an annual poll of investment trust managers conducted by the UK's Association of Investment Companies (AIC).

Out of those surveyed, 33% tipped UK equities as having the best prospects over the next 12 months.

Almost a quarter of these said the biggest cause for optimism is the fact interest rates will likely remain low, while a further 14% were positive on the UK due to improving global growth prospects.

In terms of the performance of the FTSE 100 index, 38% believe it will end next year at between 7,500 to 8,000 points, while 24% estimated it could close on between 8,000 and 8,500.

In contrast, 19% of managers surveyed believed the FTSE could end 2020 below 7,500.

Managers were also positive on the longer term prospects for UK equities. On a five-year view, the UK was the second most-popular stockmarket with 24% managers favouring it.

However, UK equities were narrowly beaten by emerging markets, with 29% of respondents believing the market area has the brightest five-year outlook. US equities came in third place, with just 19% of the votes.

Laura Foll, co-manager of Lowland Investment Company and Henderson Opportunities trust, said: "Since the EU referendum result, the UK equity market has been an easy one to ignore.

"This is backed up by fund manager surveys where the UK languishes at the bottom, in other words is often the largest ‘underweight' position globally.

"This decision to ignore the UK may be about to become much harder, if there is, at least to some degree, a resolution on Brexit following the election."

In terms of sectors, managers tipped both REITs and Software & Computer Services as the best performers for 2020, having both received 14% of the votes respectively.

Over a five-year time horizon, respondents believe the alternative energy sector will fare best, with the market area having also received 14% of votes.

The biggest consensus among the investment trust managers surveyed was the need to take ethical, social and governance factors into account when positioning their portfolios, with 62% of respondents having been influenced by an increasing demand for ESG portfolios.   

Steve Davies, manager of Jupiter UK Growth investment trust, said: "Outside of the big and quite binary consequences of the election, two other topics are likely to attract a lot of headlines.

"Our clients are focusing ever more intensely on ESG concerns - and climate change especially - and the scrutiny of sectors such as oil and gas and mining, in particular, will become more focused and more unforgiving.

"With these sectors accounting for some 26% of the FTSE 100 index, this could become a bigger issue for UK markets than elsewhere and management teams may have to ponder more radical strategic change to convince evermore sceptical investors."

Annabel Brodie-Smith, communications director at the AIC, added: "Despite 2019 being a year of Brexit and political uncertainty, it is promising that investment company managers are most optimistic about the prospects for the UK next year. The UK is also their second most favoured region on a five-year view after Emerging Markets.

"Of course, our investment company managers do not have a crystal ball and no-one knows what will happen next year.

"Investors need to focus on building a balanced portfolio that can meet their investment needs over the long term and not worry about the short-term unknowns of 2020."


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