2024 Olympics: Meet the fund managers tapping into the UK’s golden opportunity

Joss Murphy 30/07/2024 in UK

Euro 2024 may not have produced the result we Brits had hoped for (not just England’s failure in the final, but another early departure for the Scots!) – but fortunately sports fans can now turn their attention to the Olympics, which are well under way in Paris. The UK has hopefuls in long distance running, the modern pentathlon, cycling and even archery. We look at these various disciplines and ask who their investment equivalent might be, offering endurance, a breadth of skills, speed or precision-targeting.

There are currently 327 GB athletes in Paris with team targeting a minimum of 50 medals (with hopes they can achieve a record-breaking 70). It’s a big change in fortunes from the Atlanta Olympics of 1996, when team GB won only 15 medals, including just one solitary gold.

Just as pundits wouldn’t necessarily have backed the UK for Olympic success until recently, it has been a difficult period for UK assets. However, with greater political stability, lower valuations and a brighter economic picture, the UK market has started to offer green shoots of optimism, with stronger performance across the small, mid and large-cap sectors.

For investors looking to dip a toe back into the UK, they can choose from a variety of disciplines. Here are our hopefuls for the Olympic season and beyond.

Distance running: the glaring opportunity in UK value

Britain has some hopefuls in middle distance running, a discipline where they have a rich history courtesy of the likes of Sebastian Coe, Steve Ovett and Steve Cram. Keely Hodgkinson and Josh Kerr are looking good in the women’s 800m and men’s 1500m respectively. They will be looking to demonstrate their endurance and consistency in Paris 2024.

Their investment equivalent would be the City of London Investment Trust. Launched in 1891, the trust has truly stayed the distance: the same manager for more than thirty years, a 58-year track record of raising dividends plus consistent capital growth over time* – all from a portfolio of true-blue British companies.

Another UK option that has shown endurance is Fidelity Special Values. Run by Alex Wright since 2012, it has been a strong performer even when its value-focused style has been very much out of favour. Wright is a natural contrarian, investing in unloved areas of the market. It is a strategy that has delivered well over the long term.

Modern Pentathlon: the multi-asset maestros

Joseph Choong is one of the UK’s brightest hopes, having taken gold in the modern pentathlon event at the Tokyo Games — the first ever gold for a British man in modern pentathlon. He’s up against his own brother, who will be competing for Slovakia**.

The modern pentathlon combines five disciplines: fencing, freestyle swimming, equestrian show jumping, pistol shooting, and cross country running. Competitors therefore need to be all-rounders.

In investment, the equivalent would be a multi-asset portfolio. Our pick would be the BNY Mellon Multi-Asset Balanced. This has 26.5% in UK equities, plus 12.6% in UK fixed income***.

Like the pentathlon, multi-asset managers need to be masters of a number of different subjects. Multi-asset funds do this in different ways. Some will invest in funds, others in segregated mandates. The BNY Multi-asset team is a bit different in that it will invest directly in different securities. It uses the full power of the wider Newton investment desk to help build their portfolios. The team focuses on “future-facing business models” which have the ability to tap into megatrends in their respective industries.

Sprinters: UK small-cap sensations

Sprinters work in short bursts of power. This takes different forms: from Adam Peaty in the swimming, to Matthew Hudson-Smith in the 400m, to Helen Glover in the rowing**.

The same is true with investment – except it’s not always clear where these short bursts of power are going to come from. However, in our view, the best hope of a burst of speed today is in UK smaller companies. The lack of liquidity means that they can move pretty far, pretty fast.

Although this can go in both directions, we believe the signs are increasingly favourable for UK small companies. After one of the longest bear markets in their history, valuations look extremely cheap. Equally, a combination of (potentially) falling interest rates, more buybacks and M&A activity, plus improving sentiment towards the UK more generally, have seen performance improve.

The managers on the Liontrust UK Smaller Companies fund are optimistic: “Index returns remain positive over Q2 and for the year-to-date, reflective of improving sentiment towards UK equities as inflation returns to target. While economic growth remains positive; we think July’s removal of election uncertainty should also allow investors to look towards the likelihood of upcoming policy catalysts for the UK stockmarket.”

Even though there has been some recovery, share prices are still cheap, particularly for AIM-listed shares. The IFSL Marlborough UK Micro Cap Growth fund might be an option for investors who want to take a little more risk for potentially higher upside.

Archery: Staying on target under pressure

The UK has six hopefuls in the archery. This includes Penny Healey who won two gold medals in the European Games. She has now reached the top of the world rankings after winning World Cup gold in April 2023.

The target for investment funds is often loosely described as ‘capital growth’ or ‘a rising income’. However, more recently there has been a trend towards more outcome-oriented investments. These may look to beat inflation, or to target specific volatility. These aim to align with investors’ ‘real world’ goals and financial aspirations.

Our pick here would be the Rathbone Strategic Growth Portfolio. Manager David Coombs aims to beat inflation + 3%, after fees, over any rolling five-year period, and has a big focus on delivering this via a risk-controlled framework. The fund has more than achieved its aim since launch, and approaches investment with precision and focus, which helps to bring some predictability to choppy financial markets.

And finally, while we wish Molly Caudery well, we won’t be picking a fund equivalent for the pole vault. We would rather avoid anything that goes straight up, but then gives you only a few seconds before it comes straight back down.

*Source: Association of Investment Companies

**Source: Standard.co.uk

***Source: Provider factsheet, 31 May 2024

****Source: Telegraph.co.uk

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