Out of all the economies in the world, EU markets – especially the UK stock market – has been hit the hardest. Consider how in the US, the S&P Index continued to rise in 2020, while the same equivalent of the UK stock market, the FTSE 100 continued to decline.
The recent news about a vaccine about to hit the market did bump it a bit a few weeks ago, but that is not to say the rise is permanent. That is why buying UK shares in the current economy still remains a rather uncertain situation. Brexit, on top of COVID-19, is what is expected to be the cause of all of this.
That is not to say that British businesses are in any worse shape than their US counterparts; just that they’re undervalued. That is where the Schroders British Opportunities Trust comes into play. The goal is to make the most of this unprecedented situation and use the undervalued UK shares to investors’ advantage – all while driving more funds toward companies.
How Will the Schroders British Opportunities Trust Help Companies?
Schroders British Opportunities Trust will raise up to £250millionin funds through the stock exchange, in which UK shares will cost just £1 each. Applications to purchase shares must be made by November 26, 2020.This way, the Trust aims to plug the gap presented by the pandemic by injecting cash. Due to the pandemic, some companies have suffered, while most have continued to perform. All that companies need is cash they lost in order to resume their operations and recover. Both, public and private companies, valuing from £50 million to over £2 billion will get the funds as fresh equity, giving them grounds to recover and develop.
How Will the Schroders British Opportunities Trust Help Individuals?
From companies manufacturing plane parts all the way to healthcare, a large number of companies are included within the fund, and many suggest that it’s a once-in-a-lifetime opportunity, not just to help British companies grow, but also eventually get better results.
This is a situation where the investor’s resolve to support the economy and the country, or patriotism in short, has the potential to repay investors significantly. Each £1 worth of investment has the potential to grow as the market recovers.
Many investment managers don’t expect dividends, but a 10% regular growth over the coming years.
Schroders, as a role model and to build confidence in the trust, is investing $20 million of their own money into the trust. I personally think this is a rather patriotic buy and one that has the potential to grow over the years. The Trust is also geared toward promoting responsible behaviour in companies, especially when it comes to implementing “greener” practices.
Disclaimer: All investments involve risk and you should only invest capital that you can afford to put at risk. The content of this report is not financial promotion or investment advice. It is general information for reading purposes and you should speak to a financial advisor before investing.
