Personal Equity Plans: Prospects good for the stay-at-homes

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The Independent Online
MOST people like to stay close to home and put their money into UK shares when they buy a PEP. Philippa Gee, of independent financial advisers Philippa Gee & Co, says UK funds are typically the first choice for investors who are either starting a PEP or want a low-risk investment.

Ms Gee says investors should not expect huge growth in UK funds over the next 12 months. "When choosing a PEP, don't go for amazing performance over a short period. Funds that start small find it relatively easy to show good performance from a few wise decisions. It is much harder to maintain that when the fund gets larger. You should look for consistency over several years."

She recommends the Jupiter Income and Newton Income PEPs as good UK funds. "You should also be looking for a good investment house with good resources, so if the fund manager moves the quality should still be maintained."

Janice Thomson, managing director of investment discount house Chelsea Financial Services, says: "As soon as you step outside your own currency you are adding another dimension to your risk. Of course it can work in your favour as well as against, but it is less advisable if you are looking for security."

She says UK funds remain the most popular PEP among Chelsea's customers. "Jupiter Income has been enduringly popular for years, although its performance has not been so good lately. In fact it is now positioning itself as a long-term performer, which is rather adjusting the marketing to fit the statistics," she says.

Ms Thomson says money has been pouring into UK corporate bond PEPs. Many have switched from Jupiter and Perpetual equity funds to corporate bond funds from the same companies. (See page 20 for more on these funds.)

Graham Campbell, UK equities fund manager at Edinburgh Fund Managers, says he remains positive about growth prospects for UK funds.

"The market does look expensive but markets are expensive everywhere. I think the UK is much less expensive than Europe or the USA," he says. "The card up the sleeve of the UK economy is its interest rates. We have the same inflation rate as Europe but our interest rates are 6 per cent compared to 3 per cent. UK rates could easily fall to around 4 per cent over the next 18 months, which would stimulate demand in the UK economy.

"Since most people pay their mortgage on a variable rate they will have more money available and spend more, which should boost UK markets."

Contacts: Aberdeen Prolific, 0800 353737; CGU, 0845 607 2439; Invesco Fund Managers, 0800 010333; Jupiter Asset Management, 0171-314 7600; M&G, 01245 390390; Newton Fund Managers, 0800 614 330; Perpetual, 01491 416123.

the top ten

Top-performing UK fund PEPs over the last five years

PEP Sector

1. Jupiter Income UK Equity Income

2. CF The Utilities Fund UK Growth & Income

3. Jupiter UK Growth UK Equity Growth

4. River & Mercantile First Growth UK Equity Growth

5. BWD UK Equity Income UK Equity Income

6. Premier Dividend UK Equity Income

7. BWD Balanced Portfolio UK Growth & Income

8. Barclays FT-SE 100 UK Growth & Income

9. Johnson Fry Slater Growth UK Equity Growth

10. Newton Income UK Growth & Income

Source: Micropal