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UK Investment Funds: A Decade of Performance and Challenges

As we reflect on the past decade, it is clear that the landscape of investment funds in the UK has been marked by both impressive performances and significant challenges. At Cutts & Co Accountancy, we are committed to providing our clients with insightful analysis and guidance to help them make informed investment decisions.

Top-Performing Funds

Over the last decade, several investment funds have distinguished themselves by delivering exceptional returns, outperforming their sector averages across various time horizons.

For instance, the Fidelity Special Situations fund has been a standout in the UK equity market. This fund has demonstrated a remarkable ability to generate sustained value for investors, with a 10-year growth of 107.67%, significantly better than the sector average of 73.73%.

Another notable performer is the Artemis UK Select Fund, which has managed £2.5 billion in assets and delivered returns that far exceed sector averages. Over the past year, it achieved a 29.66% return, surpassing the sector average of 18.26%. Its five-year performance is particularly noteworthy, with a 93.47% return that ranks it first in its sector and far outpaces the 32.76% sector average.

Challenges Facing UK Equity Funds

Despite these successes, UK-focused stock funds have faced considerable challenges in recent years.

In 2024, UK funds experienced their worst year on record, with investors withdrawing nearly £10 billion from the market. This significant outflow is part of a broader trend, with UK equity funds facing 41 consecutive months of outflows up until November 2024.

The exodus from UK equity funds can be attributed to several factors, including the threat of a capital gains tax hike and a general lack of liquidity in the London Stock Exchange. The Financial Conduct Authority’s overhaul of listing rules in July 2024 aimed to attract more firms to the market, but many companies still cite liquidity issues as a major deterrent.

Global Context and Comparative Performance

While UK funds struggled, global equity vehicles saw a different story. Globally, equity funds raked in a record £27.2 billion in 2024, with US funds alone seeing net inflows of £11.9 billion, a significant increase from the previous year.

This disparity highlights the challenges facing the London Stock Exchange and the broader UK financial sector. The UK’s performance stands in stark contrast to the robust inflows seen in other markets, particularly in the US, where investor confidence and market conditions have been more favourable.

Investment Strategies and Future Outlook

For investors looking to maximise their returns, it is crucial to consider a diversified portfolio that includes top-performing funds across different sectors.

The Wellington Strategic European Equity fund, for example, has consistently delivered strong returns by effectively leveraging market opportunities in European markets. Over the past year, it achieved a return of 22.54%, and its five-year return of 71.48% significantly outperformed the sector average of 43.42%.

As we look to the future, it is essential for investors and policymakers to address the underlying issues affecting UK equity funds. Boosting liquidity in the London Stock Exchange and creating a more favourable investment environment are key to reviving the fortunes of the City of London.

Conclusion

The past decade has shown that while some UK investment funds have excelled, the sector as a whole faces significant challenges. By understanding these trends and challenges, investors can make more informed decisions and potentially benefit from the strong performers in the market. At Cutts & Co Accountancy, we are here to guide you through these complexities and help you achieve your financial goals.

In conclusion, the performance of UK investment funds over the past decade serves as a reminder of the importance of careful investment strategies and a deep understanding of market dynamics. As we move forward, it will be crucial to address the challenges facing UK equity funds to ensure a more robust and attractive investment environment for all.

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