"People shouldn't view the UK as a safe haven, just as they shouldn't view the US or Europe as safe. With the increase of globalisation between economies, risk will also be spread increasingly evenly," AFH Wealth Management's Graham Toone said.
Financial Express data shows funds in the IMA UK All Companies sector were generally riskier than those in other regional-focused sectors in the year to 31 December 2010.
Source: Financial Express Analytics
IMA Japan Smaller Companies, IMA Global Emerging Markets and IMA Asia Pacific ex Japan, three typically high risk areas, all took on less volatility in the period. Toone explains that the sector's diversity could account for its higher volatility.
"It's a very diverse sector, with a bias towards FTSE 250 and recovery companies, rather than blue chips. Other regional funds tend to focus on large-caps, which add stability to a portfolio," he added. Whitechurch Gavin Haynes adds that the volatility won’t necessarily be as high going forwards.
"The high risk figure reflects the volatility of the UK market over the past 12 months, as investors switched between risk-on and risk-off mentalities," he said.
There are exceptions within the sector, and investors can get high performance at a lower volatility.
Performance over 1-yr
Source: Financial Express Analytics
Financial Express data showed Liontrust Special Situations, for example, returned 36 per cent to investors in the year to 31 December at a volatility of 12.9 per cent. To put that into context, the sector average returned 17.5 per cent at a risk of 17.1 per cent. The fund is run by Anthony Cross and Julian Fosh.
Performance over 1-yr
Source: Financial Express Analytics
MFM Bowland is another fund worth looking at based on its one year performance; it returned 40 per cent to investors at a volatility of 15.4 per cent. Its sister fund MFM Slater Growth is the sector's best performer this year; an investor who'd bought into the fund at the start of January 2010 would have seen their returns grow by 76.7 per cent over the course of the year at a volatility of 19.5 per cent.
Both MFM funds are headed up by Trustnet Alpha Manager Mark Slater. At the other end of the scale L&G Growth managed returns of just 5 per cent this year, at a higher-than-average volatility of 18.4 per cent.