Brexit: UK equities “more attractive”, says NN Investment Partners

Big BenBrexit uncertainty has produced lower valuations of UK equities and transformed the market’s dividend landscape, creating a market rich with buying opportunities, NN Investment Partners (NNIP) said. The balance sheet strength of many UK larger companies has improved, said Manu Vandenbulck, senior portfolio manager, equity value at NNIP. Meanwhile, a recent Brexit conference hosted by Funds Europe heard that smaller UK stocks were more at risk from a UK departure from the EU due to higher exposure to EU revenues. NNIP said UK stocks offer an average dividend yield of around 4.5%, well above the long-term average of 3.5%. On cyclically adjusted price earnings, the market is now around 1.5 times cheaper than its own long-term average. Compared to the eurozone, the UK market is trading at attractive dividend spreads. This is attributable to the declining prevalence of commodity stocks in the FTSE; their index weight has halved since 2008. Exporters, which comprise 75% of the UK equity market, have also benefited from a weaker sterling, outperforming domestically orientated stocks. Earnings momentum is also positive, with a net upgrade in the UK outlook for the first time in three years, whereas earnings momentum in the rest of Europe remains weak or stagnant, said NNIP. “Although uncertainty will remain until the vote has passed, adding UK stocks to a European equity-dividend portfolio makes sense already today,” said Vandenbulck. “Cautious investment spending has improved average balance sheet strength of many UK large caps.” ©2016 funds europe

Sponsored Profiles

SPONSORED FEATURE: Alternative thinking

Mar 16, 2017

Portfolio Manager Davide Cataldo discusses the results of the Pioneer Investments’ survey on liquid alternatives and how investors can be encouraged to increase their allocation.

SPONSORED FEATURE: Interest rate risk hedging: Swapping to other options

Mar 16, 2017

Heightened margin requirements for cleared and uncleared OTC derivatives pose a challenge for legitimate hedging activities and are driving financial institutions to explore alternative hedging...

SPONSORED FEATURE: Why blockchain could be the fund industry’s next Ford Model T

Mar 16, 2017

Blockchain aims to radically change the way investors can access funds, says Olivier Portenseigne, Managing Director and Chief Commercial Officer of Fundsquare.

SPONSORED FEATURE: Open architecture: In need of protection

Mar 16, 2017

Greater efficiency must be embraced to ensure regulatory changes do not destroy choice for fund buyers, says Bernard Tancré of Clearstream.

Executive Interviews

CEO INTERVIEW: Munro gains three-year track record

Mar 16, 2017

Aviva Investors’ annual results this month were the third set since Euan Munro took over as CEO. Nick Fitzpatrick speaks to him about the ‘Aims’ fund at the heart of the firm’s outcome strategy.

DISTRIBUTION INTERVIEW: Tales of the unexpected

Mar 16, 2017

Laurence Terryn, a fund selector at Candriam, tells David Stevenson how the twists and turns of the past year’s macro environment flavoured her approach to fund selection.



Mar 07, 2017

Funds Europe speaks to leading Luxembourg industry figures about the growing regulatory demands on asset servicers and how to remain profitable in spite of major investments in technology.

SEC LENDING ROUNDTABLE: Both a borrower and a lender be

Jan 11, 2017

Industry heavyweights, including agent lenders, discuss issues affecting the securities lending sector such as regulation and the types of collateral being used.