Beleaguered UK equity funds in the Investment Association universe present "cracking" opportunities for long-term investors, according to several investment professionals, despite the fact they suffered their largest-ever recorded sell-off during June this year.
As such, Bradshaw favours the NinetyOne UK Equity Income fund as it has "more of a focus on dividend growth and quality companies", while Schooling Latter favours Montanaro UK Income. Angell said Trojan Income is a "steady play" that seeks out "quality businesses with resilient franchises", while Yearsley would opt for more of a recovery tilt with Aberdeen Standard UK Equity Income unconstrained.
Laura Suter, personal finance analyst at AJ Bell, is far more cautious on UK equities given "the outlook for the UK economy is pretty bleak, with predictions of the worst economic recession on record, soaring unemployment and potentially rising taxes in order to pay for the eye-watering Government spending as a result of the Covid-19 reaction".
That said, she pointed out that investors can still reap the benefits of attractive valuations through funds that are "focused on large companies which may be more resilient in a downturn", such as Simon Brazier's Ninety One UK Alpha fund.
Charles Younes, research manager at FE Investments, agreed there is a torrid combination of headwinds for UK equity investors at the moment, given oil & gas firms have been hit by the plunging oil price, banks have struggled as a result of ultra-low interest rates and Brexit uncertainty has meant sterling is "acting like an emerging markets currency".
"We don't make calls on asset classes, preferring instead to focus on diversification and risk management," he said. "Despite the consistent lag, UK equities do have a role to play in a diversified portfolio and there are certainly opportunities to be had in the on-going valuation gap of UK stocks. That said, the pandemic really hasn't changed our broad outlook, which continues to be negative to neutral. UK equities are out of favour and will continue to be for the foreseeable future."
However, Yearsley said there is a "decent opportunity in UK equities today" and that the fund outflows have been the result of "panic selling".
Husselbee added that "if [investors] have a long-term term horizon, the UK relative to other parts of the world looks to be cracking value".
"The basic rule of investing is to buy low, sell high and this is as true today as it has ever been," he said. "I would far rather be tilted towards the cheaper assets than the expensive assets, because if you overpay it can be very painful. I firmly believe the tortoise does win the race by being patient."