The majority of the UK stock market returns have been driven by just 10 stocks. Imran Sattar, Portfolio Manager of Edinburgh Investment Trust, goes through the types of companies behind this.
UK market concentration has been extreme and you can see a narrow group of stocks driving the market, some of which we've been either below the index weight or not owned, principally some of the banks and Rolls-Royce for example. And then when you look on the right-hand side, you can see 82% of the benchmark return came from just 10 stocks concentrated. Market dynamics have been changing. You've all read about the geopolitical environment that we've been in the last two years. And then, when you look on this chart on the left-hand-side, you can see a very material derating of capital light businesses versus capital heavy businesses. What I mean by that is think of businesses that are capital light as businesses that generate cash and don't have to spend that cash flow on factories and physical assets, whereas capital heavy industries do use their cash flow to invest in factories and in physical assets. So capital light businesses, software companies, capital heavy business, utility companies, mining businesses and industrial businesses. And then finally, on the right-hand side, you can see a changing market structure led by value rather than growth. So a tricky market to navigate.
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Imran Sattar
Imran Sattar heads the Global Fundamental team. He joined Liontrust in April 2022 as part of the acquisition of Majedie Asset Management, where he had managed funds for four years. Before joining Majedie in 2018, Imran was a Managing Director and fund manager at BlackRock, where he managed UK equity funds with combined assets of over £2 billion.
He holds a BSc in Mathematics & Economics from the University of Warwick and is a CFA Charterholder.