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Average Global Funds Hold A Third Less In The UK Than Before Brexit

Average Global Funds Hold A Third Less In The UK Than Before Brexit

On the sixth anniversary of the Brexit Referendum vote Investment Week examined how much global funds were investing in the UK post-Brexit.

As of January 2016, the average UK weighting in an IA Global fund was 12.4%. By the end of the year, after the vote, it had dropped to 10.8% and has decreased consistently year-on-year, accelerating in 2020 as Covid took hold. To date the average global fund has a UK weighting of 8.4%, a decrease of 33.1% overall.

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The Brexit saga has peaked and troughed, with the UK finally leaving the EU with an agreed deal of 31 January 2020, but issues have picked back up over proposed changes to the Northern Ireland Protocol.

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Nick Wood, head of fund research at Quilter Cheviot, said that this evidenced that the UK has been an unpopular investment option since the build up to 23 June 2016 and after. 

“However, it is interesting to note that the average UK weighting across global funds is considerably higher than the weighting the country has in MSCI ACWI,” he said, roughly 3.5%.

The disparity is caused by UK fund groups generally having a “natural home bias” as part of their range to  “ensure clients feel comfortable with what they are investing in”, Wood explained.

The UK’s consistent unpopularity has been backed up by fund flow data. Calastone’s Fund Flow Index (FFI) found that three of the worst months on record for UK focused funds have happen this year, including May’s “pummelling” outflows of £826m.

Part of the UK’s unpopularity has been its general value and cyclical bias, with its large-cap space dominated by banks, financials and energy companies which were not in vogue in the previous equity bull run.

“Now the UK market is at somewhat of a crossroads just…

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