Investor confidence in UK deteriorates

Active investors have switched from the UK to emerging markets as their favoured region, and are looking to invest in commodities and resources in ever-greater numbers, according to data from the Association of Investment Companies (AIC).

The body issued a statement saying: "Some 24 per cent of active investors expect emerging markets to outperform, compared to 14 per cent in the autumn. And whilst 20 per cent still favour the UK, this is dramatically down on the autumn, when 64 per cent of active investors favoured the UK."

In a poll of close to 900 high net-worth investors, commodities and resources were the sectors most commonly expected to outperform, with 33 per cent of the vote, up from 24 per cent in the previous count.

Recent research from Trustnet showed developed markets outperforming emerging markets over the past year, but the consensus among IFAs and managers is that emerging markets are still the better bet over the long-term.

The least-favoured regions among active investors were frontier markets and Japan, both with 4 per cent. Confidence in frontier markets has been hit by the political unrest in the Middle East, while Japan proved unpopular when the research was conducted, prior to the earthquake.

The research also suggested that inflation is the top concern for investors, overtaking Autumn’s biggest worries: the fear of a double-dip recession and the impact of the VAT rise to 20 per cent.

The news comes ahead of this week’s inflation figures, which are expected to show an upwards lurch in the cost of living.

"Inflation is the overriding financial concern for both active investors and the general public, with 19 per cent of active investors and 18 per cent of the general public concerned about this," said the AIC.

"Inflation is the dominant financial worry and this perhaps explains the popularity of commodities and resources. An increased appetite for risk is also clear with active investors favouring emerging markets over the UK," explained the AIC’s Annabel Brodie-Smith.

"Investors must remember to take a long-term view of their investments, not to get carried away by the latest hot sectors and ensure they have a balanced portfolio. Investment company ISAs generally have strong long-term performance, with the average investment company up 83 per cent over the last 10 years."