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Big increase in sector concentration in UK stock market says Fidelity

Sector concentration in the UK stock market has increased dramatically over 10 years while global markets have remained consistently more diverse according to research from Fidelity International.

In 1996 less than 31 per cent of the UK market was concentrated in the three biggest sectors, energy, pharmaceuticals and banks.

By 2002 the sectors accounted for around 50 per cent of the market’s total value and today the three sectors represent 47 per cent of the MSCI UK index.

Conversely, the MSCI world index has remained at about 30 per cent in the three sectors over the same period.

Fidelity global special situations manager designate Jorma Korhonen says: “The UK market has a strong bias towards three sectors-energy, banks and pharmaceuticals and biotechnology. This means that portfolio performance will largely reflect what is happening in these areas. By taking investment further a field this reliance on particular sectors is diminished.”

“Being able to search anywhere for investment ideas means that both geographical and industry biases can be avoided.”

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