Investors have been reducing their exposure to UK equity funds for reasons including the Brexit vote in 2016, which has thrown the UK’s relationship with its largest trading partner into question. The dominance of oil companies and banks in the UK market, and lack of technology companies, have made it unappealing. The UK has also been one of the most poorly performing developed equity markets this year, while the possibility of a second national lockdown and a no-deal Brexit in January mean that the future economic picture does not look good.
Historically wide discount
Good long-term record
UK economic uncertainty
However, the UK is still home to many good companies that look well placed to survive the coronavirus pandemic, but are trading at relatively low valuations. UK small and mid caps have been worse hit than large caps but might rise further when markets pick up.