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Fund managers continue to sell UK equities

It has been revealed that more and more UK fund managers have been selling equities and either reinvesting proceeds into fixed interest investments or retaining cash on deposit. While this move may seem sensible to some there are concerns that it is too little too late after the UK market has fallen so dramatically over the last 12 months. If the market was to suddenly rise on the back of interest rate reductions there is a chance that many UK fund managers could be caught out and their performance may suffer in the short term.

On the other hand if the UK market continues to fall, as some observers believe it will, the switch to fixed interest investments may protect income streams and also offer potential for capital growth as the U.K.'s interest rate cycle looks set to move sharply lower. As many of these funds are related to pension arrangements there is a need to balance both the income side and capital appreciation site in the longer term.

It has to be said that stock markets around the world have never been more difficult to predict over the last two months with sharp movements in all directions. Once the volatility has been drawn out of the market we may then see the emergence of short, medium and long-term trends.

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