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New research from SPDR ETFs, the exchange-traded funds (ETF) platform of State Street Global Advisors (SSgA), reveals over two thirds (69.7%) of IFAs have a positive outlook on the UK economy, and just 2.4% have a negative view.
This strong view explains why 40% are planning to increase their clients’ exposure to UK securities over the next six months, compared to only 2.5% who intend to reduce it.
Eleanor Hope-Bell, head of UK SPDR ETFs, commented: “In recent weeks, there has been positive news on the UK economy including growth in GDP, increasing business and consumer confidence and improving employment figures. Given this, plus the fact that investors are feeling increasingly positive towards UK PLC, we are not surprised we have seen inflows into our UK focused ETFs.”
SPDR’s research reveals nearly one in three IFAs (29%) who definitely plan to increase their clients’ exposure to the UK will use ETFs for this. The research also shows that 27% of IFAs expect to recommend ETFs more to their clients in the future, and 30% are undecided about this.
The growing confidence in the UK economy has contributed towards a net inflow of £210 million into SPDR’s seven UK focused ETFs – two equity based and five fixed income.
SPDR FTSE All Share UCITS ETF (FTAL) and SPDR S&P UK Dividend Aristocrats UCITS ETF (UKDV) have proved to be popular for investors looking to for equity market exposure, accounting for approximately 40% of net flows into UK equity ETFs.
When asked how long they think it will take for the UK to return to a ‘normal’ rate of economic growth, 47% of IFAs said three years or less. Just over three quarters (77.6%) expect the UK economy to enjoy steady growth over the next three to five years, with 2.4% anticipating a rapid recovery. Notably, only 1.2% expects it to decline.
In terms of the impact that various factors are likely to have on the country’s growth, half (50.6%) of IFAs said low interest rates would be very important. Some 39% said this about returning business confidence, as did 17.5% when asked about the importance of Sterling being competitive/export growth. Some 11.6% also said a recovery in the property market would be very important in supporting an economic recovery, but only 8% said this about falling inflation.