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Beverly Chandler

UK equities soaring despite summer sell-off

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Cheap valuations have driven investors to buy equities, despite stockmarket volatility according to Old Mutual Wealth.

Net sales into Old Mutual Wealth’s investment platform in the third quarter of 2015 shows the UK equity sector is soaring, despite the FTSE 100 having its worst quarter in four years.  The firm says that the summer sell-off in equities has left developed markets looking attractive from a valuation perspective and the volume of recent flows into UK equities may be as a result of this.
 
UK equity net sales have recovered from a low point of -7 per cent in Q1 this year to 27 per cent in Q3. However, both the FTSE 100 and FTSE all-share index fell 7 per cent in Q3, marking the largest quarterly decline since September 2011.
 
The firm writes: “Often, in times of extreme stock market uncertainty, cash and fixed interest sectors benefit. However, the continuing low interest rate environment is supressing interest in these sectors, with the UK fixed interest sector seeing net outflows of 11 per cent.”
 
The firm observes that multi-asset is one sector which has attracted sustained flows over the past two years, managing to hold on to the top spot again this quarter with 32 per cent of the net sales. Advisers and clients recognise the benefits multi-asset investing can bring as they look to diversify their portfolios with professional expertise.
 
Nathan John, investment expert, Old Mutual Wealth, says: “Investors are being drawn to the improved valuations available in equities and seem to be ploughing into developed markets. Whilst almost all developed equity markets have suffered recently, the UK has suffered to a lesser extent, encouraging more investors towards a home bias.
 
“Investors recognise the value professional investment expertise brings in controlling risk and ensuring portfolios are diversified and volatility managed. Multi-asset funds, by their very nature, are designed to offer the benefits of investment diversification whilst controlling downside risk in one solution.  It is therefore no surprise that this asset class continues to perform well in attracting investments especially given the prevailing market conditions.”
 

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