UK equities – Feature


UK equities have been the ugly duckling in institutional invest- ment portfolios for the best part of a decade. Ultra-loose mon- etary policy has favoured growth stocks and so has steered investors away from the asset class. Indeed, in the 10 years to the end of 2021, UK stocks booked £27.8bn of outflows, accord- ing to Lipper.


In a market environment where one simply has to buy a US equity index to book double-digit returns, why bother investing closer to home where equities have slumped and are surrounded by geopolitical and economic risks? During 2021, defined benefit (DB) schemes reduced their UK equity exposure to 11.6% from 13.3%, according to Mercer. This has also been driven by a general trend towards de-risking with overall DB equity allocations slumping to 19% from 61% in the past 10 years, according to the Pension Protection Fund’s Pur- ple Book. Even defined consideration (DC) schemes are not showing much appetite for their home market, with most of their portfolios invested in US stocks.


Issue 110 | February 2022 | portfolio institutional | 39


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