23 June marks the five-year anniversary of the Brexit vote, and while the UK market has rallied since the historic referendum, it still lags the rest of the world, according to new research by interactive investor, the UK’s second largest direct to consumer investment platform.
Europe stocks have performed better since the UK’s split from the 27-nation bloc (23 June 2016 to 11 June 2021), with the MSCI Europe ex UK index generating more than double the performance of FTSE All Share (85% versus 40%).
The US’s S&P 500 index was the best performer, returning 132% over the period – far outperforming the FTSE 100 (37%) and FTSE 250 (49%). The MSCI World index, which tracks the performance of large and mid-cap equity across all 23 developed markets – including the UK – returned 104%.
Richard Hunter, Head of Markets, interactive investor, says: “For the majority of those five years, the Brexit clouds hung heavily on the UK markets.
“With the picture having cleared significantly since the exit was finalised, the UK is on a much more even keel. Both the FTSE100 and FTSE250 are ahead 11% in the year to date and in striking distance of the major US indices, where the Dow has added 12% and the S&P500 13% in 2021, with both nearing record highs.
“As with the US, the UK is seeing the benefit of a successful vaccination programme, the accelerating release of pent-up demand and an extremely accommodative stance from the central bank. Alongside warming international sentiment towards the UK as an investment destination on valuation grounds, it is possible that the tide is at last turning for the beleaguered UK indices.”
Best performing funds and investment trusts since the Brexit vote
MI Chelverton UK Equity Growth was the best performing fund in the IA UK All Companies sector, returning 187% over the past five years since 24 June 2016 (again to 11 June 2021). Slater Recovery is second on the list returning 137%, ahead of VT Sorbus Vector in third, returning 124%.
When it comes to investment trusts, Henderson Opportunities (returning 90%) was the best performer in the equivalent sector, ahead of Mercantile (70%) and Artemis Alpha Trust (69%).
At the helm of the IA UK Smaller Companies sector is TM Stonehage Fleming AIM Fund, returning 211% over the same period, with FP Octopus UK Micro Cap Growth in second position and Marlborough Nano Cap Growth returning 187% and 186% respectively.
River and Mercantile UK Micro Cap Investment Company (183%) was the best performing investment trust in the AIC UK Smaller Companies sector, with Oryx International Growth (164%) and BlackRock Throgmorton Trust (150%) completing the top three.
Worst performing funds and investment trusts
At the other end of the performance table, in the UK All Companies Sector, Jupiter UK Growth (-13%), Invesco UK Equity High Income Fund (-11%) and Invesco UK Equity (-8%) were the worst performing funds in the IA UK All Companies sector.
The investment trusts at the foot of the equivalent sector – which is only comprised of nine trusts – fared better. The worst performer, Baillie Gifford UK Growth Trust, returned 51%, although Baillie Gifford only took over the management of the trust in July 2018.
In the UK Smaller Companies sector, Sarasin UK Thematic Smaller Companies (32%), Dimensional UK Small Companies Fund (48%) and L&G UK Smaller Companies (also 48%), were the worst performers in the UK Smaller Companies category.
On the investment trusts side, the worst performers were: Worsley Investors (-37%); Crystal Amber (-13%); and Chelverton Growth Trust (-10%).
Dzmitry Lipski, Head of Funds Research, interactive investor, says: “The top of the performance tables is dominated by funds investing in small and mid-cap areas of the UK market that have typically outperformed.
“The UK & EU Brexit trade deal and the rapid vaccine roll out have changed the fortunes for the UK market. With economic forecasts of the UK economy being revised up, it is no surprised that funds investing in mid and small caps are doing well. To me (and I may be wrong!), they are in prime position to benefit from one of the most attractive growth outlooks for the UK market in decades.
“Over the past couple of months, we’ve witnessed renewed appetite to the UK market, with UK options creeping back into the top 10 fund bestsellers.
“The UK market is brimming with opportunity, with cyclical stocks, which the UK market has plenty of, expected to perform well. However, it is important to remember that investment trends do not dominate in perpetuity. The key, as always when investing for the long term, is portfolio diversification – investing in a range of different securities, asset classes and sectors, thereby minimising your overall level of risk and helps to fortify your portfolio against Brexit level events.”