London-based Rathbones Asset Management, the fund management arm of Rathbones Group, has just released new research looking at investors' view of UK equities.

UK wealth managers, financial advisors and planners view UK equities as extremely cheap, with 97 per cent agreeing with that sentiment, according to new research commissioned by Rathbones Asset Management.

Over 80 per cent of respondents see an increase in allocation from investors over the next three years, the research shows. The study was carried out by research agency PureProfile, interviewing 100 wealth managers, financial advisors and planners across the UK in May 2024.

Some 88 per cent of respondents believe that UK retail investors will increase allocations to the asset class in the next six months. None thought that allocations would decrease from current levels, the research reveals.

UK large caps are likely to be the biggest beneficiary of an increase in allocations, according to respondents, with 90 per cent anticipating some form of increase. This was followed by the midcaps, where 79 per cent expect an increase. For UK small caps, however, only 53 per cent expect a rise.

British ISA
At the Spring Budget 2024, the UK government announced the introduction of the British individual savings account (ISA) â€“ the UK ISA â€“ which will provide a new tax-free savings opportunity for savers to invest in the UK and support UK companies.

Respondents were asked whether they thought this would be a positive thing for UK equity valuations, and nearly all did so, with 73 per cent calling it slightly positive and 23 per cent very positive.

In terms of their clients, 48 per cent of respondents suggested that between 25 per cent and 50 per cent of clients would use it, while 46 per cent thought between 10 per cent and 25 per cent of their clients would make use of the new ISA.

If it goes ahead, the UK ISA is expected to allow savers to invest an additional ÂŁ5,000 in UK companies each year, in addition to the current ISA limit of ÂŁ20,000. However, 84 per cent of those surveyed believe that limit will rise over the next three years.

“Regardless of the result of the upcoming General Election, we are seeing positive sentiment about investing in the UK. It remains to be seen if, and how, the British ISA is implemented but it is still hugely positive that there is an 88 per cent increase allocation to the UK forecasted in the next six months, showing conviction,” Jayne Rogers (pictured), chief distribution officer at Rathbones Group, said.

Other investment managers
Alec Cutler, portfolio manager at Orbis Investments, also sees value in the UK market, believing it to be undervalued. Cutler is heavily overweight in the UK, Japanese and Korean markets, slightly overweight in Europe and very underweight in the US. “We favour UK mid-small caps," he added. He is not alone in his views. Graham Ashby, UK all cap fund manager at investment manager Schroders, also believes now could be a good time for investors to increase their exposure to UK shares. FrĂ©dĂ©rique Carrier at RBC Wealth Management thinks that there are opportunities in 2024, despite the subdued economy, and recommends a market weight position in UK equities. See more commentary here.