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Investors over exposed to UK stocks

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Nine out of 10 independent financial advisers have said investors are over exposed to the UK stock market, according to Ignis Asset Management.

The survey of 180 advisers in late August revealed almost half thought investors were ’definitely’ over-exposed to domestic equities. Forty-two per cent admitted investors were ’probably’ over-exposed.

Jonathan Polin, director of Ignis Asset Management, said: “Investors traditionally have a home bias when choosing funds but it is startling to discover that so many advisers believe UK investors are over-exposed to UK equities.

“It is clear that investors need to rethink their strategy and seriously consider whether their existing asset allocation is likely to deliver the performance they need in order to meet their retirement objectives.”

Meanwhile, 58 per cent of advisers said they did not believe we are in a bull market, with just 5 per cent saying we are ‘definitely’ in a lasting bull run.

The study suggested that advisers ‘bearish’ views were reflected in their gloomy predictions for the UK stock market for the remainder of the year. The majority predict that the FTSE 100 will close the year below 5000, slightly under its current level. Over half believe the FTSE 100 will close 2009 between 4500-5000, and a further 26 per cent predict a close of between 4000-4500.

”After such a tough period for us all it is encouraging to see that advisers are feeling fairly bullish about their business levels, if not about the UK stock market,” added Polin.

“Investors are clearly recognising the value of advice and seeking help when making decisions that could have a serious impact on their future.”

With UK equities set to disappoint in the short term and current asset allocation levels failing to close pension shortfalls, advisers were asked their opinion on how best to help solve the looming retirement crisis.

The research suggests that greater emerging markets exposure will help solve the pension’s crisis, as 83 per cent of advisers believe that greater exposure to emerging market equities is likely to play a key role in closing pension deficits, while 73 per cent admitted they typically allocate less than 10 per cent to the sector.

Almost a quarter of advisers said they allocated 11-15 per cent to emerging markets and a further 3 per cent allocated 16-20 per cent.

The research also demonstrates that the areas to which advisers may allocate a greater percentage in the future to include Asia Pacific, emerging markets and the US, which are the three sectors IFAs expect to perform best over three and five years.

“The fact that advisers expect business levels to rise over the coming months is further proof that investor sentiment is improving,” said Polin.

Published in the Financial Times

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Written by Magda M Ali

January 6, 2010 at 11:23 pm

Posted in Published pieces

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