Wealth managers, financial advisers and financial planners in the UK overwhelmingly view UK equities as ‘extremely cheap’, leading to predictions of growing allocation to domestic investments, according to recent research commissioned by Rathbones Asset Management Ltd.
The research found that 97% agreed with the sentiment, and over 80% expected an increase in allocation from investors over the next three years.
Some 88% of wealth managers, financial planners and financial advisers believe UK retail investors will increase allocations to the asset class in the next six months. Looking at a three-year horizon, 81% still expect to see increases to UK equities from retail investors. None believed allocations would decrease from current levels.
UK large caps are expected to be the likely to be the biggest beneficiary of an increase in allocations, according to respondents, with 90% anticipating some form of increase. This was closely followed by the midcaps, where 79% expect an increase. For UK small caps, however, only 53% expect an increase.
Within the research respondents were asked whether they thought the British ISA would be a positive thing for UK equity valuations, and nearly all did so, with 73% calling it ‘slightly positive’ and 23% ‘very positive’.
In terms of their clients, 48% of respondents suggested that between 25% and 50% of clients would use it, while 46% thought between 10% and 25% of their clients would make use of the new ISA.
If it goes ahead, the British ISA is expected to allow an additional £5,000 to be invested in UK companies per year, in addition to the current ISA limit of £20,000. However, 84% of those surveyed believe that limit will rise over the next three years.
Jayne Rogers, chief distribution officer at Rathbones Group Plc, said: “Regardless of the result of the upcoming General Election, we are seeing positive sentiment about investing in the UK. It remains to be seen if, and how, the British ISA is implemented but it is still hugely positive that there is an 88% increase allocation to the UK forecasted in the next six months, showing conviction.”
