Using the Lipper Leaders scoring system to analyse the best performing funds in the IA UK All Companies sector.
What a difference a year makes. When we last looked at UK All Companies, it was lagging significantly other major equity markets: most noticeably US and Global. This year looks rather different. Investment Association Global sector returns over 12 months were 15.14% and, over three years, 43.89%, to 31 October. Those figure are 14.24% and 48.63%, respectively, for the North America sector. And dreary old UK All Companies, with barely a sniff of the artificial intelligence the markets are so transfixed by? It returned 15.54% and 40.58%: still trailing over three years, but playing catch-up, and ahead over one.
Some things, however, have changed little—not least the sector’s unpopularity with domestic investors. Over the past 12 months, they have redeemed more than £15.5bn from these funds (compared to £19.1bn for the same period last year), as North American funds netted £11.2bn.
More than two centuries past, the venerable political economist David Ricardo wrote how the “fancied or real insecurity” of overseas investments “check the emigration of capital”—a state of affairs “which I should be sorry to see weakened”. Well, the world turns, and if a year is a long time in investing, then 200 of them…
However, the real shift in investor preferences took place much more recently. In 1981, UK individuals held 28.2% of domestic shares, UK institutions such as pension and insurance funds owned 68.25%, and foreign investors just 3.6%. By 2022, these figures had changed to 10.8%, 31.5%, and 57.7%, respectively, marking a significant rise in foreign ownership.
UK institutional exposure has also declined sharply. Pension schemes have reduced their domestic equity allocation from around 50% in 2000 to just 4%, driven by liability-driven investment strategies and regulatory changes. The UK’s shrinking weight in global indices has compounded this trend: its share of the FTSE All-World index fell from about 8% in 2008 to less than 3.5% in 2025, while the US surged from about 44% to nearly 64%. Fund flows reflect this shift: between 2024 and mid-2025, global and US equity funds attracted more than £100bn and £30bn, respectively, while UK equity funds saw outflows exceeding £100bn.
The UK market is value-tilted, dominated by Financials, Consumer Staples, and Industrials, with minimal technology exposure. Conversely, the S&P 500 is growth a growth market, with both technology and the Magnificent Seven accounting for about a third of the index. The latter’s outperformance globally has reinforced investor preference for US equities.
The corollary of this, however, is that the US is eye-wateringly expensive by historic standards. There is an inverse correlation between valuation and future return. That makes the UK market’s significantly lower valuations attractive. While US valuations are supported by stronger growth expectations than in the UK market, as we saw when the market bit its collective nails to the quick in anticipation of Nvidia’s quarterly earnings announcement, that growth is not a done deal.
If UK institutional investors aren’t tempted, there are signs that foreign investors are paying attention. And, of course, there’s nothing to prevent UK retail investors getting involved; unless your home life is very strange, you don’t have to periodically justify your decisions to a risk committee.
Somewhat unusually, we have the same top fund over three years as last year: Ninety One UK Special Situations, up 31.36% and 112.42% over one and three years (see table). It has significantly outperformed its benchmark over the time. It scores a 5—the highest—for Lipper Consistent Return. It takes some punchy positions, with top-holding Rolls Royce occasionally running not far off 10% of the portfolio, and now at 8.86%. That overweight has helped the fund over the past year, with the stock more than doubling in price.
In contrast to last year, when there were five passive funds in the table, this time there is only one, the smart-beta First Trust United Kingdom AlphaDEX UCITS ETF. This may be an indication that there has been an increase in the dispersal of UK equity returns, offering active managers more opportunities.
Table 1: Top-Performing UK All Companies Funds Over Three Years (with a minimum five-year history)
All data as of October 31, 2025; Calculations in GBP
Source: LSEG Lipper
This article first appeared on p15 of the December edition of Moneyfacts.
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