May
2022
Revisiting IPOs in London
DIY Investor
14 May 2022
Tougher times but some encouraging signs
Continued outflows from UK equities in April 2022
Data from Calastone show continuing outflows from UK equities, with investors pulling £836m from UK equity focused funds in April, beating the record set in January 2022. Two-thirds of UK focused funds saw outflows, with small- and mid-cap funds bearing the brunt of the selling. ESG focused funds continued to see inflows and UK focused funds with an income bias also fared well.
The report had one stark statistic: of the £49bn invested in equities funds since January 2015, no net new money has flowed into UK-focused funds. Initially the negative sentiment around UK equities was a consequence of Brexit, then flows to more attractive (US) growth markets as technology and healthcare boomed through the pandemic.
The expected flow back to UK stocks on valuation and exposure to old economy names anticipated in late 2021 vanished by March 2022 with the onset of inflation, rising rates and the invasion.
Outflows attract M&A and venture capital
We made the case in our November 2021 report that the UK was one of the most undervalued markets in the world. The UK has long been out of favour for its mix of value and cyclical names; Susan Noffke, head of UK equities at Schroders, commented in December 2021 that ‘Somebody’s buying UK shares, it’s just not stock market investors at present’.
The comment related to a report Schroders published looking at the c 350 constituents of the UK MSCI IMI Index at 31 December 2011. Over the next decade, 112 of these were acquired, with 68 of them acquired by an overseas company. A further 14 delisted for other reasons (eg administration). There has also been a greater focus on the UK from US venture capital firms.
The $10.2bn US venture capital investment in high-growth UK companies in 2021 was a record. Sequoia Capital, an early backer of the likes of Apple and Google and which currently has a stake in one-fifth of the world’s unicorns, opened a London office in 2021 citing that the UK and Europe are on the verge of a technology take-off. An argument for the better public market valuations in the US compared to the UK has been the deeper pool of growth funds. Early signs are that this is starting to change.
To read the full report click here >
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