There was a strong correlation between inclusion among the top 20 and consistent dividend growth.
London, Jan 10, 2020 (Issuewire.com) - Investors poured £1bn into open-ended UK equity funds in December, buoyed by the Conservatives' emphatic general election victory, amid hopes of a return from the wilderness for UK stocks, which have long been out of favour.
Data from fund settlement service Calastone shows inflows into UK-focused funds hitting a two-year high last month, with a big spike following the general election result.
Investors poured more than £330m into UK equity funds in the two days following the election and over £740m in the 13 trading days in the month after the result.
It marks a significant turnaround in sentiment towards UK stocks, which have been clouded by Brexit uncertainty ever since the UK voted to leave the European Union in 2016.
UK smaller company and 'mid-cap' investment trusts have also reflected the rebound. As 'closed-end' funds with fixed pools of capital, they cannot take in more money but have seen their share prices jump 5-7% on average in the past month. Increased investor demand has also narrowed the discounts - or gaps between their share prices and underlying asset values - to 4%, around half their usual level.
Retail investors have pulled £13.7bn from UK equity funds since the Brexit referendum, according to Investment Association data up to the end of November.
UK stocks' pariah status has also been reflected in an exodus from global fund managers, who have maintained an average 28% underweight since the Brexit vote, according to regular surveys from Integral Development Asset Management.
'December proved just how powerful the influence of politics is over investor activity,' said Edward Glyn, head of global markets at Calastone.
'Regardless of the relative merits of Brexit or remaining in the EU, an end to the UK's political deadlock and a clearer path for the country (at least in the short term) is unleashing enormous pent-up demand for UK equities in particular, whose performance has lagged far behind their peers elsewhere in the world.'
The UK stock market rallied strongly on the election result, with stock exposed to the UK domestic economy gaining the biggest 'Boris bounce' in the immediate aftermath of the poll.
That was reflected in the surge in the FTSE 250, whose stocks have less of an overseas focus than the blue-chip FTSE 100, and which jumped 3.4% on the day of the result.
Figures from fund data provider Morningstar show a FTSE 250 tracker, HSBC FTSE 250 Index, was the best-selling UK equity fund over December, enjoying net inflows of £136m over the month
Integral Development Asset Management highlighted the strong inflows into its £1.3bn UK Value Opportunities fund in an update to the stock market this morning, as it reported outflows for the quarter across its fund range.
'The election result and reduced Brexit uncertainty increased demand for our UK Value fund,' said Senior Analyst Richard Carter.
The Morningstar data also shows a renewed appetite among investors for some of the top-performing UK equity funds of recent years.
Citywire AAA-rated Montanaro UK Income fund, the best-performing UK income fund of 2019, enjoyed an inflow of £96m over the month.
Chelverton UK Equity Growth, the standout UK equity fund of the last five years, having delivered 158% under Citywire AAA-rated James Barker, received another £42m into its coffers.
CFP SDL UK Buffettology, beaten only by the Chelverton fund in the Investment Association's UK All Companies sector with a 128% return, gained £59m.
Value-focused UK fund managers, who have been drawn to the beaten-up share prices of stocks focused on the UK domestic economy, were also in demand. Investors poured £42m into the JOHCM UK Equity Income fund, which enjoyed a resurgence in performance from late August onwards.
As were UK small cap managers. EXO Capital's Janus Anderson UK Smaller Companies fund topped the sales charts in this sector, gaining £43m in December.
Investment platform Interactive Investor said 'UK smaller companies were easily the theme of December' with portfolios skewed to UK small and mid-cap shares accounting for four out of the top 10 investment trust purchases in the month.
Seven of the top 10 most bought trusts were UK-focused, while UK equity funds accounted for four of the top 10 most bought on Intercative Investor.
HSBC's FTSE 250 tracker was sixth most popular, Franklin UK Mid Cap at seventh, and TB Amati UK Smaller Companies in eighth position.
Integral Development Asset Management's Nick Wentworth said: 'The sector had been largely shunned by investors because of Brexit-related political uncertainty, but the recent election of fortified Conservative majority government offers some clarity over how the sage might end,' he said.
The bounce in the FTSE 250 and in small-caps 'underlines renewed confidence in the sector and the potential for an influx in investment from overseas from international players', said Wentworth
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Source :Integral Development Asset Management
