- The portfolio invests in predominantly large-cap UK equities and aims to generate an annual income higher than the FTSE All-Share index.
- Despite being a much maligned and unloved asset class for several years, Ben Russon, portfolio manager and co-head of UK equities (large cap) at ClearBridge, believes there are several reasons to be optimistic about the UK equity market today. Not only is it one of the cheapest markets in the G7, he noted it also has one of the highest dividend yields across comparable developed markets.
- “If we start with the fundamentals, the balance sheets of UK corporates are generally in very good health,” he said. “Roughly half of the names in our portfolio have on going share buybacks, which is attractive from a capital return perspective.”
- From a valuation perspective, Russon said that not only is the UK attractive compared with its international peers, it is cheap compared with its own history as well, making it a good starting point for investing.
- Another reason to be positive about UK equities, he added, is the global diversification they offer. With the FTSE 100 earning roughly 75% of its revenues from overseas, Russon argued the UK is a very international market that plays on global themes, but which can be accessed by investors at a lower valuation.
- “The UK market is known for both its geographical spread, being a clear play on international trends and forces, but it also relatively defensive as well,” he added. “So, when things do become more difficult globally, you tend to find the UK market is lower beta and more of a safe haven.”