These are unnerving times for anyone deciding how and where to invest this year’s Isa allowance.
The April 5 deadline is just 19 days away. Yet the collapse of Silicon Valley Bank (SVB), the Californian tech firm lender, has sent shockwaves through global stock markets.
Questions are being posed about the solidity of American, European and other banks. Who would not be spooked by such events?
But the unexpected should be the spur to reconsider your position on any subject.
The SVB scandal is yet another sign of how the ending of the era of easy money is hitting the US tech companies that make up a large element of many portfolios (you may hold much more than you think).
In light of this, could UK plc be the best home for this year’s Isa cash? Such a choice would diversify your portfolio, with a sector for every taste, from construction giants to video games.
Global investment banks are eyeing the UK, yet British investors have been selling shares in UK companies. This is against the background of the other major controversy of spring 2023 – the UK-listed groups leaving London for more fame and fortune and razzle-dazzle in Wall Street.
Unpredictably, however, this flight is turning more attention onto the hidden allure of UK plc, in the wake of improved economic forecasts in this week’s Budget.
Alec Cutler, Bermuda-based manager of the Orbis Global Management fund, says: ‘There are lots of UK-quoted companies that would have double the market capitalisation in Wall Street, yet Brits don’t seem to care about this.’
Cutler cites names like Balfour Beatty – ‘the best construction company in the world’, Headlam, Europe’s leading floor coverings group, and Rolls-Royce, the aero-engine manufacturer.
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David Battersby, of the wealth manager Atomos, suggests that Isa investors with an above- average appetite for risk could even exploit SVB’s adverse impact on the share prices of Barclays, Lloyds, NatWest and HSBC, which snapped up SVB’s British arm for £1.
Alexandra Jackson, manager of the Rathbone UK Opportunities fund, says: ‘The UK market is trading at a record-wide 40 per cent discount to the US. Among those optimistic about the outlook are businesses exposed to American infrastructure spending, like Ashtead, CRH and Hill & Smith, which we hold in our fund.’
Jackson also highlights the chance to get involved in the UK’s creative sector, saying: ‘We have a stake in Team 17, the video games company based in Wakefield which has a back catalogue of family-friendly indie games.’
Rathbone UK Opportunities is one of my bets on UK plc. In my Isa, I hold Jupiter UK Alpha for its spread of big British names, like AstraZeneca and Drax, the UK’s largest renewable energy supplier.
Since the outset, I have made monthly contributions, rather than committing the entire £20,000 allowance in one chunk. This is a system that should suit those rattled by current circumstances and who feel happier to move gradually into the markets.
Jason Hollands, of BestInvest, suggests the Murray Income investment trust for those keen to back FTSE 100 names. The share price of this trust is at a 5 per cent discount to the value of its net assets. Hollands also suggests the Fidelity UK index fund. He adds: ‘For a more high-octane approach, I like Artemis UK Select fund which looks for undervalued companies. The managers can also take short positions in companies where they think the share prices will fall.’
CJ Cowan, of Quilter Investors, recommends JO Hambro UK Dynamic, which also scouts out companies with ‘underappreciated value’. The fund’s manager Alex Savvides perceives the UK market to be brimming with bargains.
The SVB affair is forecast to place a premium on companies with strong free cash flow (the money left over after maintaining capital assets and meeting costs) as opinion turns more against the former tech darlings, with their dependence on borrowing and jam-tomorrow promises.
This week’s Budget removed the Lifetime pension saving allowance. But the right to also save an annual £20,000 tax free in an Isa remains an important concession. Isa stands for individual savings account. Could this be the year when you make a personal bid to back Britain?
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