Which investment funds in UK equity sectors have the lowest and highest exposure to UK revenues?
The UK stock market has a heavy international bias, with many companies listed in the country having little or no exposure to the UK economy in terms of revenue are listed on the London Stock Exchange. Of all companies listed on the FTSE 100, for example, over 70% of revenue is derived from abroad.
This creates the counterintuitive dynamic whereby bad news for the UK economy can translate into good performance for the FTSE 100. The bad news is often greeted by a sell-off on the pound, which in turn adds a bump to the foreign-derived earnings when exchanged into sterling.
At the same time, the fortunes of these companies are more dependent on the global economy than the British, offering arguably a degree of protection against the UK’s unpredictable politics.
For those looking for this protection against the fallout from Brexit, new data from Morningstar shows which investment funds in the various UK equity sectors have the lowest exposure to UK revenues.
As the chart above shows, Neptune Income has just 17% exposure to UK revenues, the smallest amount for Morningstar’s UK Equity Income fund category. Within its UK Flex-Cap Equity, Quilter UK Equity Growth has the smallest, with 20.3% and among UK Large-Cap the LF Purisima UK Total Growth fund has the lowest exposure, at 18%.
Other investors, however, may take the opposite view, instead opting for funds with higher UK exposure; a trend that various fund managers are currently playing in favouring the more domestically focused companies.
The UK funds with the highest UK revenue exposure include MI Downing Monthly Income (71.4%), Unicorn UK Ethical Income (71%) and Omnis Income & Growth (70.1%).