5 UK Equity Funds that Are Weathering the Storm

We shine the spotlight on five UK equity funds that have shown the ability to outperform throughout the recent difficult conditions

Richard Whitehall 12 June, 2012 | 12:48PM
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The last 17 months have provided a challenging environment for investing in UK-listed equities. From April 2009 to the end of 2010 the FTSE All-Share index rose by 32.6%, providing some consolation to investors who had stayed with the asset class following the huge sell-off in 2008 through to early 2009 when the index fell 36.3%. However, in 2011, as concerns over the global economic recovery surfaced and the eurozone sovereign debt crisis spread from the periphery to Italy and Spain, equity markets faltered, with short-term performance being driven even more strongly by investor sentiment and the so-called “risk-on, risk-off” trade.

The performance of the FTSE All-Share index gives evidence of these wild fluctuations. In 2011 the index returned -3.5% but in the first quarter of 2012, as investors took comfort from US economic growth and the ECB’s Long-Term Refinancing Operation (LTRO), the index rose 6.1%. Such positive sentiment had waned by the second quarter, however, and in April and May the index lost all of those gains and more to show a loss of 7.1%.

It is clear that the performance of active managers has been at the mercy of such fluctuations. In 2011, the IMA UK All Companies sector average was 3.5% behind the index, but in the first quarter of 2012 the sector average outperformed the index by 2.8%. In such a context and with ever increasing competition from passive options, some investors may well have lost faith with active management. However a number of funds have shown the ability to outperform throughout these recent difficult conditions.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Richard Whitehall

Richard Whitehall  is a portfolio manager for Morningstar Investment Management

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