Liontrust Asset Management chief executive John Ions
The chief executive of one of Britain’s biggest fund managers has said a new government with a sizeable majority could help drive a revival in the country’s lacklustre stock market.
Liontrust Asset Management boss John Ions told shareholders on Wednesday that Labour’s victory in last week’s general election ‘should herald a period of stability that will be positive for financial markets’ as he also praised the party’s ‘pro-growth agenda’.
Ions earlier this year cited the ‘out of favour’ status of UK stocks, particularly small and mid-cap companies, as contributing to an investor exodus from Liontrust funds.
Of the £6.1billion withdrawn from Liontrust funds last year, roughly £4billion was from UK equity vehicles.
The fund manager, which last year was forced to abandon an attempted takeover of Swiss rival GAM, saw new investor outflows slow to £923million in the three months to 30 June from £1.6billion in the same period last year.
Total assets under management dipped 2.8 per cent to £27billion.
However, the vast bulk of these outflows – around £770million – were from UK retail funds and managed portfolio solutions, suggesting domestic investors are yet to rekindle their interest in the market.
UK stock market performance has lagged international peers for some time
Ions said: ‘Labour’s large majority in last week’s election should herald a period of stability that will be positive for financial markets.
‘It is encouraging that the new government has a pro-growth agenda and is committed to the simplification of pensions.’
The MSCI UK index – which measures the performance of the large and mid cap segments of the UK market – is up 6.94, 5.74 and 2.7 per cent over three, five and 10 years, respectively.
The MSCI World, meanwhile, has added 7.38, 12.32 and 9.73 per cent, respectively, over the same periods.
And data shows the gap between the performance of UK smaller companies and international peers is even greater.
The MSCI UK Small Cap index is down 2.67 per cent over three years, while adding just 1.97 and 5.03 per cent over three and 10 years, respectively.
International small cap peers have added 2.15, 7.5 and 10.04 per cent, respectively, over three, five and 10 years.
But Ions said greater political stability ‘along with falling inflation and the expectation of a reduction in interest rates’ should ‘encourage’ international investors to return and ‘boost capital flows to the stock market’.
He added: ‘Given the ever-increasing need for individuals to save more for their retirement as well, this will significantly improve the outlook for asset managers.
‘Liontrust is well placed for this improving environment as we have a strong brand, distribution, robust investment processes and a leading reputation for managing UK equities.
‘Liontrust will also benefit from the progress we have been making in positioning the Group for the future, including further expanding our investment and distribution capability, increasing client engagement and enhancing operations.’
Liontrust shares were up 2.3 per cent to 617.6p approaching midday on Wednesday, having lost almost 75 per cent since their September 2021 peak of 2,455p.
UK small caps have struggled – but European peers lack world index too
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