As the UK reopens today, James Burns, co-manager of Smith & Williamson Investment Management’s MPS shares his thoughts on the outlook for UK equities.
James Burns, co-manager of Smith & Williamson Investment Management’s MPS comments:
“Most Covid guidance and legal restrictions will be lifted on 19 July and that will provide another lift to the UK economy.
“UK equities have had a decent run, but the unlocking and recovery more broadly are far from priced in – on a longer-term view the UK is still miles behind other markets, which it has lagged over the last five years. The recovery from Brexit has a long way to go.
“The UK remains one of the cheapest equity markets in the world and there is a lot of positive news around M&A, with bids for UK companies seemingly coming on a weekly basis. With interest rates at rock-bottom levels, and the UK equity market offering so many opportunities, M&A is not going to go away anytime soon.
“Lots of the activity we are seeing is in the mid-cap space and we own a lot of actively managed funds, including Artemis UK Select and Man GLG Undervalued Assets, which invest here and could benefit.
“We are particularly bullish on UK student accommodation which we believe will do well as the economy unlocks and we move towards the new academic term. It is interesting to note that private equity is paying attention to this too, with M&A a feature of the sector.
“We added the Empiric Student Property REIT to our Defensive and Defensive Income models recently at a discount to net asset value and we believe that will be a fruitful holding over the coming months and beyond. In our view, asset classes such as real estate are best accessed through investment companies, as REITs do not suffer the gating issues that some open-ended funds have experienced recently. As the economy unlocks, the student property story will gain strength, and we believe it is a sector to watch for the foreseeable future.”
