If investing is about putting your money into high-quality opportunities at fair prices, now could be a great time for Irish people to consider UK-focused funds. We explain why, and suggest a couple of options that could do the trick for Irish-based savers.
Before we start – remember this isn’t an investment recommendation. If you’d like an investment recommendation tailored to your needs, you can start here, or get in touch here.
Investing in the UK is pretty unfashionable just now. According to Bristol-based Hargreaves Lansdown, investors have withdrawn nearly £10 billion from UK funds since the Brexit vote.
That has pushed recent performance down – and could mean a buying opportunity.
To the Irish investor, UK funds shouldn’t be dismissed, for three main reasons.
1. The currency advantage
Since the Brexit vote, sterling has fallen by around 14% compared to the Euro. As an Ireland-based investor, that means your money buys more when converted into pounds.
2. Great companies
The UK is home to some great businesses, which will continue to perform, whatever the environment. UK companies such as Unilever, BP and Vodafone are world-leading in their industries.
What’s more, they are often well-known to the Irish investor, and well governed under UK corporate governance and stock market requirements.
3. Uncertainty is holding back prices
The extended Brexit negotiations mean UK market is out of fashion. But that won’t continue forever. Once more clarity on negotiations emerges, it’s likely investors will renew their interest in the UK market as a buying opportunity.
How can you play the UK investment opportunity?
We believe investing via a fund is particularly suitable for the UK right now. There will be winners and losers from Brexit, so it makes sense to spread your money across many companies via a fund.
You could start with a UK equity fund
Take a look at Friends First’s UK equities fund, for example. This fund aims to give exposure to the UK equity markets as a whole.
Its biggest investments are in well-known, worldwide businesses, headquartered in the UK, such as global bank HSBC, Guinness-owner Diageo, and pharma giant Glaxosmithkline.
Recent performance has been poor – almost flat over the last 3 years. But before that the fund was delivering closer to 9% annual growth.
Consider adding a UK property investment fund
For further diversity, it’s worth considering Aviva’a UK property fund. Again, this fund has had weak recent performance, including a 5.3% loss in 2016, year of the Brexit vote. It posted annualised growth of just 2.2% over the last 3 years.
But before that, annual growth was in the 11-14% region. The fund is invested in properties (mainly offices and retail) across the UK from Glasgow to London, and Exeter to Manchester, so gives a strong exposure to the performance of UK property as a whole.
Next steps
A blend of, say, UK equities and property (maybe in conjunction with a multi-asset fund) could be a great way for the Ireland-based investor to participate in the performance of post-Brexit Britain in the years ahead.
Talk to Moneycube today about how we can help you invest in UK funds.
