How Have UK Equity Fund Managers Reacted to Brexit?

With significant rises seen across oil and materials spot prices, from previously depressed levels, the oil and gas and mining sectors outperformed the broader market

Simon Dorricott 13 October, 2016 | 10:03AM
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Investors fleeing UK equities this year have missed out on healthy gains. Absolute performance in 2016 has been strong with the FTSE All-Share Index showing a positive 8% return. However, this is significantly behind 23% return of the MSCI World Index over this period.

The main talking point regarding the UK equity market over the past few months has, of course, been the impact of the EU referendum. However, prior to the vote there had been a shift in equity market leadership in 2016 compared to 2015. With significant rises seen across oil and materials spot prices, from previously depressed levels, the oil and gas and mining sectors outperformed the broader market by a significant margin over the first half of the year, having had a torrid time in 2015.

Food retailers, another deep value play in the UK market, has also seen a recovery. Aside from these changes, there was also a less pronounced switch away from some areas that had performed well in 2015. Reflecting the above, we have seen a marked change in leadership from a market-cap perspective, with the largest companies in the market, represented by the FTSE 100 Index, outperforming the mid-cap FTSE 250 Index, having lagged for the previous four calendar years.

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Simon Dorricott  is a Senior Fund Analyst for Morningstar