The three key questions for all investors: Why this strategy? Why now? Why pick it over its peers?
UK equities now present an attractive diversifying option for investors concerned by the “elephant in the room” that is the size and overly correlated natured of the global artificial intelligence trade, argues Callum Abbot, portfolio manager, equities at J.P. Morgan Asset Management as he discusses the merits of the group’s UK Equity Core Active UCITS ETF.
“The big hype over the last few years has been technology and AI – and that has done phenomenally well,” he says in the above WealthWhys video. “Now, we are not talking that down at all but what we would acknowledge is that you might want some diversification – and the UK does not have that much technology.
Combine all that and you have a global market – on the cheap – that pays you a pretty attractive yield, which we think makes for a nice, tidy package.”
“That has held it back somewhat but, as we look into the future of where technology is going to go and what the return on capital is going to be there, we think the UK offers a really nice diversifier for clients who are looking to get away from that big, correlated bet that is kind of the ‘elephant in the room’ at the moment.”
Abbot also notes the end-result of the UK receiving little attention from investors in recent years is a market that is “incredibly cheap” and “ trading at big discounts to pretty much any global peer”. “And yet it really is a global market,” he continues.
“About 85% of revenues come from overseas – and actually there is reasonable earnings growth there as well. Combine all that and you have a global market – on the cheap – that pays you a pretty attractive yield, which we think makes for a nice, tidy package.”
All-weather approach
As for why investors should pick the UK Equity Core Active UCITS ETF ahead of its rivals, Abbot points to the strategy’s performance and cost. “We have delivered good performance in growth markets and we have delivered good performance in value markets,” he says.
“And so, for those investors who are looking for that consistency – that all-weather approach – we think we offer a very attractive proposition. Furthermore, because this is a low-tracking error, enhanced-index product, we charge a very reasonable fee as well.”
Callum Abbot, portfolio manager, equities at J.P. Morgan Asset Management
A full transcript of this interview can be found after this box while you can view the whole video by clicking on the picture above. To jump to a specific question, just click on the relevant timecode:
00.00: Why should investors allocate to UK equities?
00.38: Why should they do so now?
01.15: Why should investors pick this strategy ahead of its rivals?
Why should investors allocate to UK equities?
UK equities have not had much love over the last few years and the end result is that you have a market that is incredibly cheap and trading at big discounts to pretty much any global peer – and yet it really is a global market.
So about 85% of revenues come from overseas – and actually there is pretty reasonable earnings growth there as well. So, if you combine that together, you have a global market – on the cheap – that pays you a pretty attractive yield, which we think makes for quite a nice, tidy package.
Why should they do so now?
The big hype over the last few years has been technology and AI – and that has done phenomenally well. Now, we are not talking that down at all but what we would acknowledge is that you might want some diversification – and the UK does not have that much technology.
That has held it back somewhat but, as we look forward into the future of where technology is going to go and what the return on capital is going to be there, we think the UK offers a really nice diversifier for clients who are looking to get away from that big, correlated bet that is kind of the ‘elephant in the room’ at the moment.
Why should investors pick this strategy ahead of its rivals?
We have a fantastic track record of generating very consistent returns across cycles in our core funds – so we have delivered good performance in growth markets and we have delivered good performance in value markets. And so, for those investors who are looking for that consistency – that all-weather approach – we think we offer a very attractive proposition.
And because this is a low-tracking error, enhanced-index product, we charge a very reasonable fee as well. So I think it offers a nice way to access this market – and access J.P. Morgan Asset Management’s active range – but at a very reasonable price.
