Investing in the UK

[Avantegarde]

Are there any obviously good reasons for anyone to invest in UK focused investment trusts or UK tracker funds? I have several such investments: a FTSE All-Share tracker, Finsbury Growth & Income IT, and Standard Life Smaller Companies IT. Compared to my various global or regionally focused trusts and trackers, the UK ones have performed poorly in the past five years. Apart from the benefits of diversification, what are the good and sound reasons for continuing to have a significant weighting in the UK?

[Dod101]

The main point is surely diversification. One day the UK ITs may do well. Finsbury has not done too badly has it? But then it is not UK focussed to any extent. Most of its investee companies are trading overseas.

Dod

[richfool]

Are there any obviously good reasons for anyone to invest in UK focused investment trusts or UK tracker funds? I have several such investments: a FTSE All-Share tracker, Finsbury Growth & Income IT, and Standard Life Smaller Companies IT. Compared to my various global or regionally focused trusts and trackers, the UK ones have performed poorly in the past five years. Apart from the benefits of diversification, what are the good and sound reasons for continuing to have a significant weighting in the UK?

One reason surely is that, due to various political matters such as Brexit, the UK has been under-valued by the rest of the world, if not avoided, and once those political matters are resolved, the UK should bounce back up again.

[johnstevens77]

[quote="richfool
One reason surely is that, due to various political matters such as Brexit, the UK has been under-valued by the rest of the world, if not avoided, and once those political matters are resolved, the UK should bounce back up again.[/quote]

For that reason, I recently added 3i infrastructure and Blackrock Smaller Companies Trust and also topped up Blackrock Throgmorton Trust in my small growth portfolio.

john

[mc2fool]

The main point is surely diversification. One day the UK ITs may do well. Finsbury has not done too badly has it? But then it is not UK focussed to any extent. Most of its investee companies are trading overseas.

Uh? Finsbury is 78.7% in the UK and its top holdings include London Stock Exchange, Unilever, Diageo etc. https://www.theaic.co.uk/companydata/0P ... /portfolio

If you're saying that it's "not UK focussed" 'cos those sell soap powder and Guinness globally, well, yeah, and, as I'm sure you're aware, three quarters of FTSE100 earnings come from abroad. So does that mean that by the same reckoning a FTSE 100 ETF is also "not UK focussed"?!?

Anyway, Nick Train himself thinks UK blue chips (and FGT) are cheap at the moment. https://citywire.co.uk/funds-insider/ne ... s/a1427844

[jackdaww]

Are there any obviously good reasons for anyone to invest in UK focused investment trusts or UK tracker funds? I have several such investments: a FTSE All-Share tracker, Finsbury Growth & Income IT, and Standard Life Smaller Companies IT. Compared to my various global or regionally focused trusts and trackers, the UK ones have performed poorly in the past five years. Apart from the benefits of diversification, what are the good and sound reasons for continuing to have a significant weighting in the UK?

================================

yes , as part of a global portfolio.

there are plenty of good investment trusts and trackers that cover USA , japan , far east , china , emerging markets and so on .

the UK may well recover in time , though many people on here are overweight in it .

[Charlottesquare]

Are there any obviously good reasons for anyone to invest in UK focused investment trusts or UK tracker funds? I have several such investments: a FTSE All-Share tracker, Finsbury Growth & Income IT, and Standard Life Smaller Companies IT. Compared to my various global or regionally focused trusts and trackers, the UK ones have performed poorly in the past five years. Apart from the benefits of diversification, what are the good and sound reasons for continuing to have a significant weighting in the UK?

If the individual shareholder is living in the UK then one reason might be to have the investments and the individual user within the ambit of the same currency thus reducing exchange rate risk. Personally I do not get that bothered as only a limited part of my retirement income will come from my investments anyway, but one might want more UK facing investments if all one's costs were in sterling and one required the income from these investments for living costs. (Not that that many FTSE100 shares are mainly UK centric re their earnings but some of the smaller companies shareholdings will be more UK leaning)

[scottnsilky]

On the basis (and hope!) of a half decent deal on the EU situation, I am about to buy a tracker and a more adventurous fund in the FTSE 250 universe.
I don't consider myself a competent share picker, so I've plumped for 2 funds.

Fingers crossed....

[Adamski]

Morgan Stanley, Citi, UBS, Goldman have all come out and said UK stocks should likely outperform US stocks in 2021 as so undervalued. Could be a pleasant surprise after underperformance since Brexit referendum. I would also say UK is a defensive bet as already priced at a 25% discount wouldn't expect to fall as heavily as Us, Tech in a global sell off.

[Dod101]

Are there any obviously good reasons for anyone to invest in UK focused investment trusts or UK tracker funds? I have several such investments: a FTSE All-Share tracker, Finsbury Growth & Income IT, and Standard Life Smaller Companies IT. Compared to my various global or regionally focused trusts and trackers, the UK ones have performed poorly in the past five years. Apart from the benefits of diversification, what are the good and sound reasons for continuing to have a significant weighting in the UK?

If the individual shareholder is living in the UK then one reason might be to have the investments and the individual user within the ambit of the same currency thus reducing exchange rate risk. Personally I do not get that bothered as only a limited part of my retirement income will come from my investments anyway, but one might want more UK facing investments if all one's costs were in sterling and one required the income from these investments for living costs. (Not that that many FTSE100 shares are mainly UK centric re their earnings but some of the smaller companies shareholdings will be more UK leaning)

I was going to make the same point but thought better of it because as you must know there is an exchange risk with the likes of Unilever, Shell and many others, even if they account in sterling (as you will also know, Unilever accounts in Euros and Shell in US Dollars) After all very constituents of the FTSE100 trade only in sterling in the UK marketplace. It is a bit like the one who said he slept better at night because Nestle is quoted in Swiss Francs and accounts in the same currency. The fact is that it has exchange risks everywhere.

Dod

[Charlottesquare]

Are there any obviously good reasons for anyone to invest in UK focused investment trusts or UK tracker funds? I have several such investments: a FTSE All-Share tracker, Finsbury Growth & Income IT, and Standard Life Smaller Companies IT. Compared to my various global or regionally focused trusts and trackers, the UK ones have performed poorly in the past five years. Apart from the benefits of diversification, what are the good and sound reasons for continuing to have a significant weighting in the UK?

If the individual shareholder is living in the UK then one reason might be to have the investments and the individual user within the ambit of the same currency thus reducing exchange rate risk. Personally I do not get that bothered as only a limited part of my retirement income will come from my investments anyway, but one might want more UK facing investments if all one's costs were in sterling and one required the income from these investments for living costs. (Not that that many FTSE100 shares are mainly UK centric re their earnings but some of the smaller companies shareholdings will be more UK leaning)

I was going to make the same point but thought better of it because as you must know there is an exchange risk with the likes of Unilever, Shell and many others, even if they account in sterling (as you will also know, Unilever accounts in Euros and Shell in US Dollars) After all very constituents of the FTSE100 trade only in sterling in the UK marketplace. It is a bit like the one who said he slept better at night because Nestle is quoted in Swiss Francs and accounts in the same currency. The fact is that it has exchange risks everywhere.

Dod

At least with multinationals you can hopefully trust they are paying some smart people to manage their exchange risks, that is certainly not the case when I select my own ITs etc (I tend for more of a scatter gun approach so maybe it balances out a bit by random chance, but certainly no science re country specific exposure is applied, I merely decide what part of the world I think is worth a punt and buy ITs to fit( so right now Asia, China and North America getting most followed by UK, Europe and a bit in Emerging)

[Mike88]

I'm hoping the UK will come good if a BREXIT deal is finalised. Of course it could go the other way if there is no deal. The UK has been so poor over the last few years I am living in the hope things will improve which is not the greatest of investment strategies.

[Charlottesquare]

I'm hoping the UK will come good if a BREXIT deal is finalised. Of course it could go the other way if there is no deal. The UK has been so poor over the last few years I am living in the hope things will improve which is not the greatest of investment strategies.

Not so sure on the "come good" part , I am more inclined to view any deal brave Boris can grab as more slowing down the exodus of business relocating into the EU and the longer term issues that will bring for the UK economy- on the plus point I have so few years left until I retire that I am not sure it will make that much direct difference to me; in the long term the future is likely the Pacific

[SalvorHardin]

I'm hoping the UK will come good if a BREXIT deal is finalised. Of course it could go the other way if there is no deal. The UK has been so poor over the last few years I am living in the hope things will improve which is not the greatest of investment strategies.

No deal could create a tremendous buying opportunity. If there is serious interruption to food supplies and/or electricity, IMHO a deal will be sorted out PDQ regardless of long treasured political positions and pronouncements on both sides, many of which will quickly be jettisoned.

Politicians and bureaucrats who won't adapt will find themselves on the receiving end of angry mobs if the supermarkets run short. That's a time to buy the UK. Buy when there's blood on the streets, not when everyone is happy. Investors pay a high price for a cheery consensus.

Nick Train, manager of Finsbury Growth and Income, recently remarked that he considers that global investors aversion to the UK stockmarket is getting ridiculous. The strong brand multinationals in the FTSE100 have been marked down relative to similar foreign companies just because they are British.

Finsbury's website recently put up a video of Mr. Train discussing its portfolio, and expanding on this point, after which he takes questions. Link below (it's about 75 minutes)

https://www.finsburygt.com/

I wouldn't buy a FTSE100 tracker (far too many weak moat / price taking companies and badly run banks in it for my liking). But some FTSE100 companies are well worth a look for stockpickers. Finsbury Growth and Income is my largest IT holding.

[Avantegarde]

Thanks for the replies. As I mentioned first, I agree that diversification is a good reason to buy some UK shares. But the UK stockmarket has about 2,100 companies on it, out of about 41,000 quoted on stockmarkets world-wide. So, what would be the point, in your view, of having more than about 5% of your portfolio focused on UK companies?

[mc2fool]

Thanks for the replies. As I mentioned first, I agree that diversification is a good reason to buy some UK shares. But the UK stockmarket has about 2,100 companies on it, out of about 41,000 quoted on stockmarkets world-wide. So, what would be the point, in your view, of having more than about 5% of your portfolio focused on UK companies?

Why do you think the number of companies listed on a country's exchange should be reflected in your portfolio? I don't see the logic of that.

https://www.indexmundi.com/facts/indica ... O/rankings

[Lootman]

Thanks for the replies. As I mentioned first, I agree that diversification is a good reason to buy some UK shares. But the UK stockmarket has about 2,100 companies on it, out of about 41,000 quoted on stockmarkets world-wide. So, what would be the point, in your view, of having more than about 5% of your portfolio focused on UK companies?

A better reason to have 5% allocated to the UK is that the market cap of the UK stock market is about 5% of the global market cap.

25 years ago it was 10% so that serves to highlight how badly the UK has done relative to the rest of the world for as long as most here have been investing.

[DavidM13]

The main point is surely diversification. One day the UK ITs may do well. Finsbury has not done too badly has it? But then it is not UK focussed to any extent. Most of its investee companies are trading overseas.

Dod

Revenue exposure of FGT based on underlying holdings:

UK - 34%
USA 23%
Europe 19%
Asia Emerging 12%

[Dod101]

The main point is surely diversification. One day the UK ITs may do well. Finsbury has not done too badly has it? But then it is not UK focussed to any extent. Most of its investee companies are trading overseas.

Dod

Revenue exposure of FGT based on underlying holdings:

UK - 34%
USA 23%
Europe 19%
Asia Emerging 12%

Thanks. I am surprised that the UK exposure is as high as that, I wonder if Nick Train bothers about that or if he simply buys what he regards as great companies?

Dod

[DavidM13]

The main point is surely diversification. One day the UK ITs may do well. Finsbury has not done too badly has it? But then it is not UK focussed to any extent. Most of its investee companies are trading overseas.

Dod

Revenue exposure of FGT based on underlying holdings:

UK - 34%
USA 23%
Europe 19%
Asia Emerging 12%

Thanks. I am surprised that the UK exposure is as high as that, I wonder if Nick Train bothers about that or if he simply buys what he regards as great companies?

Dod

A bit about his mindset from my old friends at Morningstar https://www.morningstar.co.uk/uk/news/2 ... -i-am.aspx