UK advisers tip UK equities for 2015
UK financial advisers surveyed by Fidelity Worldwide Investment have tipped UK equity to do well in 2015, despite looming risk factors such as equity market volatility and the May general election.
78% of the 467 financial advisers and wealth managers in the UK surveyed said they were as optimistic or more optimistic about the prospects for markets this year than last, with some 71% saying that equities would offer the best returns of any asset class.
UK equities are particularly attractive, with 40% of respondents saying they will recommend clients increase their exposure to this asset class. This reflects a positive view of developed markets overall, with just 11% saying they will recommend clients sell from their existing developed market exposure.
Also sticking with the UK theme, 90% of those who responded to the survey said they would recommend clients maintain or increase exposure to UK equity income assets.
However, the intermediaries are less optimistic about the outlook for fixed income. Half recommended that their clients should reduce holdings of UK government bonds, given the prospects for monetary tightening. Interest rate normalisation is considered a top risk factor for 2015, alongside political risk, as over half the respondents cited these two risks as likely to force them to change their recommendations through the year.
Interestingly, well over a quarter, 27.3%, of respondents expect to recommend passive funds through the year.
John Clougherty, head of Retail at Fidelity Worldwide Investment, said: “For the last couple of years our survey has revealed that advisers and wealth managers continue to favour equities over fixed income for their clients’ portfolios. While many have, and continue to, predict a rotation out of bonds, the asset class has produced reasonably strong returns with UK gilts and UK corporate bonds returning nearly 14% and 10.63% respectively in 2014. However, the prospect of rate hikes during the year could certainly impact bond returns, thus making strategic bond selection a crucial tool in allocation decisions.
“Index trackers sit at the core of many investment portfolios and this trend looks set to continue in 2015. Whilst active management remains at the core of Fidelity’s investment philosophy, we recognised the growing demand for tracker funds and launched our new range last year at market leading costs which has proved extremely popular among both advisers and intermediaries.
“While 2015 looks set to provide some interesting hurdles in the UK, such as the general election, confidence in the UK market shows no sign in abating. Fidelity’s own asset allocation experts concur with this view, with developed market equities remaining a top choice.”