John Baron: Seven magnificent UK investment trusts

The UK equity market continues to languish at a c40 per cent discount to global markets. Commentators and investors alike have all but thrown in the towel. Some MSCI PIMFA benchmarks used to monitor my portfolios’ performance have recently reduced their UK weighting. Yet, I dare to suggest there is hope. Catalysts for a re-rating lurk in the shadows. As such, I have been increasing my portfolios' exposure to the UK in recent months, at the expense of overseas equities, courtesy of seven trusts that promise to outperform their respective benchmarks as the UK plays catch-up – let’s call them the UK’s magnificent seven.

Winds of change

Explanations as to why the UK market remains cheap are well rehearsed: an overweight exposure to ‘old economy’ sectors (at the expense of more highly rated technology companies); five prime ministers in eight years and the concurrent political challenges; onerous listing rules and obligations seeing many companies move to the US; a huge divestment in recent decades by pension funds of equities in general and the UK in particular; and a perception that economic growth has been relatively pedestrian have all contributed to the malaise. Any good news has paled into insignificance. The bears have been rampant and have carried all before them.