investing for a potential UK recovery

eastmidsaver

hi guys,  so just wondering what people's thoughts on this is.   bank of england,   along with other analysts, believe that 1st quarter the economy will shrink,  but then from Q2 and rest of 2021 will be a rapid recovery.  on top of this,  many global investors now see the UK as very undervalued  (and US now as overvalued).  i am therefore thinking of putting some of my savings and taking a punt on UK stocks.   
buying individual shares is not too suitable for me,  so will buy funds.    my questions is,  is it better to go for a managed fund,  or maybe go for an index tracker?
if managed,  i am thinking i will go for baillie gifford and/or linsdell train as both OCF costs are around 0.5% and have reputable fund managers. any other suggestions are welcome.
but if i go for index,  i;m not sure if it is better to go for FTSE 100, FTSE 250, or FTSE Allshare.
would appreciate any thoughts, opinion or suggestions.
thanks.

jimjames

FTSE250 is generally seen as the index that reflects the UK economy more than the FTSE100 which has more global companies in it. The HSBC FTSE250 tracker is a pretty good one

dunstonh

 i;m not sure if it is better to go for FTSE 100, FTSE 250, or FTSE Allshare.

Probably a managed fund focusing on small and mid cap as your satellite fund and a FTSE all share as your core fund in respect of your UK allocations.

masonic

How much of the above do you think is priced into the market? It probably isn't a novel theory that you alone have devised.

As a (presumably) UK resident, it would be odd to have no UK investments at all as a global investor. 100% UK would be a bit of a gamble.

If you want to profit from the recovery of the UK domestic economy, than a FTSE100 tracker is not going to be a great choice, the FTSE250 better reflects the UK economy. Active fund(s) or a mixture of active and passive are reasonable options, depending on what you are trying to achieve.

Alistair31

dunstonh said:

 i;m not sure if it is better to go for FTSE 100, FTSE 250, or FTSE Allshare.

Probably a managed fund focusing on small and mid cap as your satellite fund and a FTSE all share as your core fund in respect of your UK allocations.

Could you note some examples?

eastmidsaver

thanks for your comments and i will consider the options you have suggested.
masonic -  i do have a reasonably diversified portfolio where some will be UK,  however, i just fancy taking a bit of a punt in buying 1 or 2 UK only equity funds to concentrate this sector,  and hope for the best.  will be looking to do this at some point next month .. maybe around £1k tops if i can.

bd10

Reg the question how much UK is still undervalued, I think there were/are two factors in play. First, we have seen a continuous outflow since 2016 really. Less risk appetite on UK market with the political uncertainty at the time. This I'd say had a drag on UK domestics and UK large caps were unattractive also because they are more of a value play and were out of fashion for since the GFC. From Nov/Dec last year, I think it started around the time Biden won the election and Boris presented the Brexit deal, that UK stocks came back. Before the Pound took off on all the vaccine positivity, UK leading ahead of Europe and US, I would have said UK stocks were still undervalued by half what they were last summer. Now it's a bit trickier I think. UK value play is still there I think, but less attractive as it was last summer. Picked up a few UK equity income trusts from July onwards myself, getting paid 4-5% div yield to wait until we would eventually have a deal (tick) and get out of lockdown (semi-tick).

Thrugelmir

Any interest in investment trusts? 

Steve182

Thrugelmir said:

Any interest in investment trusts? 

Yes, Baillie Gifford UK growth trust.

They've only held the reigns for a couple of years since Schroder were sacked so past performance is of limited relevance. 

BG are heavily focused on growth so are likely to outperform in a bull market. 

ChilliBob

I've been thinking about this recently too, I have a very small amount of direct exposure via the Malborough UK Micro Cap fund. I'm looking to increase exposure in a different pot now. I still think the small cap side of things is more appropriate than large cap. I'm also thinking sbout value.. I know the growth vs value debate is returning (again!) and nobody has a crystal ball, but I figure two UK focused funds with a bias towards small cap, one specialising more towards value, one growth could be a good plan.
Not sure if active funds or Investment Trusts would fit best here, I've not dipped into value focused stuff much yet. 

I don't recall there being a wider value debate recently, has there been one and I've missed it?! 

Linton

Alistair31 said:

dunstonh said:

 i;m not sure if it is better to go for FTSE 100, FTSE 250, or FTSE Allshare.

Probably a managed fund focusing on small and mid cap as your satellite fund and a FTSE all share as your core fund in respect of your UK allocations.

Could you note some examples?

See https://www.trustnet.com/fund/price-performance/o/ia-unit-trusts?sector=O%3AUKSMALL
for a full list of UK Small Company OEICs/Unit trusts.

I hold Liontrust UK Smaller Companies which is one of the less "exciting" but there are probably many others I would consider.  Dont purely go on longterm performance as some, especially those focussing on extremely small companies can be very variable.