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The UK was the most unloved market among fund managers during the post-referendum period. From 23 June 2016 to the end of September 2020 (just before the vaccine rally), the FTSE All Share fell 3.5% in dollar terms, with the MSCI AC World Index up 50.5%, thanks in part to the pound falling 12.9% in USD. Even as late as April this year, fund managers were underweight the FTSE All Share, according to the BofA ML Fund Managers Survey – managers were around 1.5 standard deviations below their historical average positioning. This was despite the market being one of the best performers in the reflationary rally. Since 1 October 2020, the FTSE All Share is up 37% in dollar terms compared to 27.2% for the FTSE World ex UK, helped by a 7.9% jump in sterling versus the dollar. Remarkably, the same survey in May found that fund managers were 1.5 standard deviations overweight versus their historical average. Why are fund managers suddenly so positive on ‘plague island’, as the charmers at the New York Times dubbed their favourite holiday destination?
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