After Brexit, investors took a cautious approach to investing in UK equities. While the UK economy underwent a series of challenges, Liontrust Asset Management takes a look at whether the asset class is poised for a turnaround.

The investment manager says that UK equities have underperformed compared to global peers in recent years, and several businesses have seen an impact of the global financial crisis, Brexit, Covid and other legacy issues.

While investors see the UK market as lacking innovation and productivity, James De Uphaugh, Fund Manager at Edinburgh Investment Trust, a unit of Liontrust, says that the asset class offers long-term value and that we may be “in the foothills of a renaissance of UK equities”.

The asset manager says that UK companies are adopting innovation and driving growth in various sectors, pointing out certain companies which have now improved their performance.

“One question that often crops up when we lay out the case for UK equities is that UK productivity has lagged every other major country since the GFC – so something must be awry,” as per James De Uphaugh. “However, measures of productivity are by their nature backwards looking, and therefore fail to take account of positive developments being made by businesses around innovation and technology or management changes.”

Giving the example of the NatWest Group and M&S, the asset manager talks about how the firms have been transformed by relatively new management teams which are using a mix of new technology.

Summing up the insight, Liontrust says that investors who are uncertain about investing in UK equities must also note that most large UK companies which are listed have a majority of their business overseas. “This means that investors in UK equities will often have exposure to global businesses at an effective discount because they are investing through the UK market,” says the investment management firm.

View the full insight here.