According to Janus Henderson’s inaugural Portfolio Panorama report, sentiment among UK investors, on average in 2024, mirrored cautious optimism, with many adopting a balanced investment approach.
Yet despite this, there was a slight but noticeable shift, with allocations to equities inching higher. Further data – including reallocation to small caps – also points towards UK investors being somewhat hopeful about the improving medium-long-term outlook.
· Allocation trends include:
- Equities: After benefiting from large-cap tech stocks, investors increased their exposure to small caps, signaling renewed confidence in their comeback potential
- Fixed income: Investors kept their allocation in defensive strategies with a focus on high-quality fixed income, allowing investors to lock in higher yields and strengthen portfolio resilience.
- Alts and implementation: The appetite for passive strategies remained stable whilst overall portfolio costs increased. There are early signs of a move away from liquid alternatives,as returns from traditional assets increased in 2023 and 2024.
· The Portfolio Panorama report analyses allocation trends across 1,229 UK portfolios from March 2024 – February 2025
17th March 2025 – UK investors are making strategic shifts in portfolio allocations in response to evolving macroeconomic and geopolitical factors, according to the inaugural Portfolio Panorama report from Janus Henderson’s Portfolio Construction and Strategy (PCS) team.
The data highlights that UK investors are increasing exposure to small-cap equities while maintaining strong allocations to high-quality fixed income. This reflects a balance between seeking new growth opportunities and preserving stability in an uncertain macroeconomic environment driven by geopolitical realignment, tariff threats, and diverging central bank policies. Meanwhile, developments in artificial intelligence are adding uncertainty, prompting investors to reassess their portfolios and look for the next big growth areas.
The Portfolio Panorama report analyses trends across 1,229 UK portfolios from March 2024 to February 2025. It focuses on aggregated data from UK portfolios over two distinct six-month intervals: the ‘Previous Period’ (March – August 2024) and the ‘Current Period’ (September 2024—February 2025).
Equities: Strong home bias as UK investors remain significantly overweight vs. global equity market caps
UK investors have reduced their exposure to US stocks while keeping European allocations steady, highlighting a shift in regional preferences. Despite overall strong performance of US markets, UK investors are responding to recent volatility by seeking out opportunities closer to home.
UK investors remain significantly overweight in domestic equities vs. global equity market caps, with technology continuing to lead sector preferences, followed by financials and industrials. While large-cap stocks still represent the majority of equity holdings, their share has dipped from 70% to 68% over the ‘Previous’ and ‘Current’ periods, with allocations to small—and mid-cap stocks increasing. Small-cap exposure rose from 8% to 9%, while mid-caps increased from 22% to 23%, signaling a potential comeback.
Fixed income: Against a backdrop of stickier inflation, uncertainty around Trump policies, the Autumn budget, and lower UK growth expectations, investors kept their allocation in defensive strategies with a focus on high-quality fixed income
Allocation to high-quality fixed income remained stable, highlighting continued uncertainty around the short- and medium-term economic outlook. However, a small increase in average UK portfolio duration – from 3.2 to 3.3 years over the ‘Previous’ and ‘Current’ periods – indicates growing confidence that inflationary pressures will continue to recede.
The proportion allocated to defensive strategies rose slightly from 61% to 63% over the ‘Previous’ and ‘Current’ periods, while exposure to diversifying assets, including flexible bond funds, declined. Within fixed income, investors maintained a strong focus on defensive assets, with allocations to government and corporate bonds remaining steady at 39% and 31% each. This reflects a preference for stability amid ongoing macroeconomic uncertainty, as investors position themselves for potential central bank rate cuts.
Alternatives and Implementation: UK investors scaled back allocations to liquid alternatives amid an equity bull run in 2024 and 2023.
Amidst a sustained equity bull run in 2023 and 2024, clients have scaled back on liquid alternative investments, while passive strategies have remained dominant. The average portfolio allocation to passive or index funds experienced a slight dip from 44% to 43% over the ‘Previous’ and ‘Current’ periods.
Exposure to long-short equity strategies more than halved, contributing to a modest decline in overall alternative allocations from 3.4% to 3.3% over the ‘Previous’ and ‘Current’ periods. This reduction in hedging strategies reflects an increasing appetite for risk, as investors position themselves for continued market strength. Portfolio expense ratios rose marginally from 40 to 42 basis points over the ‘Previous’ and ‘Current’ periods, reflecting subtle shifts in implementation costs.
Matthew Bullock, Head of Portfolio Construction and Strategy, EMEA & APAC, at Janus Henderson, said: “The findings from our inaugural Portfolio Panorama report highlight the careful approach UK investors are taking in today’s market environment. The increased focus on small-cap equities suggests a search for new growth opportunities, while strong allocations to fixed income reflect a continued emphasis on stability. It will be interesting to see how investors act over the next few months and whether the decline in appetite for long-short equity strategies is continuous or a short-term trend. As global market dynamics evolve, understanding these portfolio shifts will be key for long-term investors.”
