ISA millionaires are more likely to invest in UK equities than non-millionaires, data from Hargreaves Lansdown has revealed.
The investment platform says it now has 1,160 ISA millionaires and most have their money invested in equities, with a greater proportion in the UK than other ISA clients.
Those with ISAs worth in excess of £1 million have, on average, 44.7% invested in the UK, compared to 45.8% invested in global assets. In comparison, other ISA clients have 38.5% of their wealth invested in UK assets and 51.5% invested in global assets.
Victoria Hasler, head of fund research at Hargreaves Lansdown, said: “Having a million pounds in your ISA may sound like a pipedream but it’s actually more common than you might think. HL ISA millionaires have most of their money invested in equities but within this they are well diversified globally. They tend to have a higher proportion invested in the UK than non-millionaires. Non-millionaires prefer global and US equities.”
Despite their preference for UK assets, the best performing region over the past decade has been the US. The S&P 500 returned 335% over the ten years to the end of May, while the MSCI World returned 233% and the FTSE All Share returned 78%. The US market is home to some high growth stocks which tend to perform very well in the good times but can often fall just as fast in the difficult times. The UK, on the other hand, is a more mature market, home to large, steady companies, said Hargreaves Lansdown.
Hasler commented: “The underperformance of the UK market has led to a big gap opening in valuations with many UK companies starting to look quite cheap compared to their US peers. Such a situation is not usually sustainable for any length of time and indeed we have started to see this valuation gap narrow already, with the FTSE All Share returning three times as much as the MSCI World in the last three months. This trend could still have some way to go through and many UK companies look attractive on valuation grounds.”
Hargreaves Lansdown’s data showed the Artemis Income fund to be the most popular UK fund, returning 89.42% over the ten years to the end of May 2024, more than 10% ahead of the FTSE All Share index.
Fidelity Special Situations fund has also proved popular, returning 98.04% over the same period, more than 20% ahead of the benchmark.
Hasler said UK smaller companies could also be an exciting space in which to invest.
“Traditionally, these types of companies have performed well in the lead up and immediate aftermath of rate cuts. While we’re not necessarily expecting an imminent rate cut, it seems highly likely that the Bank of England’s next move will be down rather than up. A fund which we think could perform well over the long term in the UK smaller companies sector is Royal London UK Smaller Companies.”
Hasler said the crossover between the favourite funds of ISA millionaires and non-millionaires is high, with just three of the top ten most popular funds among millionaires not featuring on the list for non-millionaires.
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