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October 3, 2023

There’s More to UK Equities than Value Stocks

by Dewi John.

The UK is a famously—or infamously, depending on the prevailing style—value-driven market.

Technology is less than 4% of the FTSE All Share, while being the largest sector in the FTSE All World index at more than 27%. The largest UK tech company is Vodafone (market cap $26.7bn), followed by BT Group ($14.2bn). Unsurprisingly, the largest All World stocks are pretty much the same as the tech giants that dominate the S&P 500, with the first non-US entry being Taiwan Semiconductor in eighth place. Vodafone makes the index cut, but it’s a long scroll down.

On the other hand, Financials make up 23% of the UK index, while just shy of 15% of the All World; Energy is 11% of the UK (almost entirely Shell and BP) and a nudge under 8% of the All World.


Growth beats value

All other things being equal, you would therefore expect the UK market to outperform when value does. But, of course, unless your UK equity exposure is, was, and always will be, a FTSE All Share or 100 tracker, the market itself can be divided up by growth, core, value, and by cap size. Over five years, for example, the FTSE UK Growth index beats its value equivalent by 27% to 10.1% (chart 1).


Chart 1: UK Equity v Growth five-year cumulative returns

Source: LSEG Lipper. GBP to 31 August 2023


Looking at this on a quarterly basis shows that things have swung around considerably over the period (chart 2).


Chart 1: UK Equity v Growth five-year quarterly returns

Source: LSEG Lipper. GBP to 31 August 2023


Following on from an earlier analysis of Equity Global funds, we have run UK equity funds through Lipper’s Global Holdings Based Classifications.

This breaks fund equity allocations down into geography, style, and market cap. It provides a transparent quantitative model that can be applied consistently across global markets, providing dynamic peer groupings for performance, risk, and overall comparisons. This can be used to create peer groups and to help explain performance within a broader sector, which I’ve done with the Lipper Equity UK and UK Income fund classifications from 2020 on, on an annualised basis, and over three and five years to the end of August. The results are ordered by five-year returns in descending order.


Source: LSEG Lipper. GBP to 31 August 2023


Doff your cap

What’s perhaps surprising is that the fund categories don’t simply mirror the index returns over five years: market cap effects clearly overwhelm style, with the top three classifications being large cap. What’s more, within this, value funds outperform growth.

Year-to-date, the UK has participated in the US large cap growth-inspired rebound—despite this being a “thin” rally, powered by the S&P “Magnificent Seven”—with Large-Cap Growth. There’s still clearly a cap-effect feeding through, as the top two classifications are large (growth, then core), followed by three multi-cap classifications: consecutively, growth, core, and value, as the market direction for the period might suggest.

That’s still a factor in 2022, with performance cascading down from large through multi-cap to mid, with the top-performing classification being UK Large-Cap Value—no surprise, when rapidly rising rates kicked the support from under high-PE growth stocks.

Such cap and style analysis is (obviously) useful for categorising funds by these factors. It’s also useful for identifying those funds that, despite clear style characteristics, are doing something different among their peers.



LSEG Lipper delivers data on more than 360,000 collective investments in 113 countries. Find out more.

The views expressed are the views of the author and not necessarily those of LSEG Lipper. This material is provided as market commentary and for educational purposes only and does not constitute investment research or advice. LSEG Lipper cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice.

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