The overwhelming majority of UK wealth managers and financial planners view UK equities as “extremely cheap” and expect an increase in allocation from investors over the next three years, research by Rathbones Asset Management has found.
The survey revealed 88% of wealth managers and financial advisers believe UK retail investors will increase allocations to the asset class in the next six months.
Looking at a three-year horizon, 81% still expect to see increases to UK equities from retail investors. None believed allocations would decrease from current levels.
UK large caps are likely to be the biggest beneficiary of an increase in allocations, according to respondents, with 90% anticipating some form of increase.
This was closely followed by the midcaps, where 79% expect an increase.
For UK small caps, however, only 53% expect an increase.
At the Spring Budget 2024, the UK government announced the introduction of the UK Isa, which will provide a new tax-free savings opportunity for savers to invest in the UK and support UK companies.
Respondents were asked whether they thought this would be a positive thing for UK equity valuations, and nearly all did so, with 73% calling it ‘slightly positive’ and 23% ‘very positive’.
In terms of their clients, 48% of respondents suggested that between 25% and 50% of clients would use it, while 46% thought between 10% and 25% of their clients would make use of the new Isa.
If it goes ahead, the UK Isa is expected to allow an additional £5,000 to be invested in UK companies per year, in addition to the current ISA limit of £20,000.
However, 84% of those surveyed believe that limit will rise over the next three years.
Rathbones chief distribution officer Jayne Rogers said: “Regardless of the result of the upcoming General Election, we are seeing positive sentiment about investing in the UK.
“It remains to be seen if, and how, the UK Isa is implemented but it is still hugely positive that there is an 88% increase allocation to the UK forecasted in the next six months, showing conviction.”
