The British Isa “will not do anyone any good” and the chancellor should have unveiled an American Isa instead.
This is what Blue Whale Capital chief executive and chief investment officer Stephen Yiu told Money Marketing.
Yiu, who also runs the Blue Whale Growth Fund, added that the British Isa “is a very bad idea” and he does not believe anyone should invest in it.
During the Spring Budget on 6 March 2024, chancellor Jeremy Hunt announced the introduction of a new British Isa.
Hunt said the British Isa will come in the form of an extra £5,000 tax-free allowance to encourage UK retail investment. The existing Isa allowance is £20,000.
Even with the tax benefit that the Isa adds, Yiu claimed a UK individual would still receive a higher return on investment (ROI) in US shares.
He added that for a person living in the US to have home bias when it comes to investing is beneficial, but not for an individual from the UK.
Yiu explained that UK investors already have a large amount invested in the UK, such as property and shares.
AJ Bell has also reacted negatively to the announcement and called the British Isa an “ill-conceived” idea that will not achieve its objective of encouraging more investment into UK companies.
AJ Bell chief executive Michael Summersgill said: “50% of the money our customers currently invest through their stocks and shares Isas is invested into UK assets, so this new allowance will have no impact whatsoever on their investment behaviour.”
“A tiny minority of people max out their £20,000 Isa allowance each year, but these are the only ones that will see any benefit from the additional British Isa allowance,” said Summersgill.
About two-thirds of the Blue Whale Growth Fund that Yiu manages invests in US companies.
The fund holds such American companies as Charles Schwab, Mastercard, Meta, Visa and Microsoft.
Yiu added that even though these companies are American, the organisations are global and have different locations around the world.
In January 2024, Goldman Sachs head of the investment strategy group and chief investment officer of wealth management Sharmin Mossavar-Rahmani said US equities are an “upward-trending asset class”.
She explained that over the past 15 years, US equities have over-performed and an investor would have seen greater returns from investing in US equities over Chinese equities.
Blue Whale Capital was founded in 2016 and the Blue Whale Growth Fund was launched in 2017.
If a 50% UK weighting is what ISA investors want, there’ll be nothing to stop them maintaining it. The only difference will be that they’ll be able to allocate (initially) £12,500 to the UK as opposed to £10,000 as at present.
Hasn’t the time to invest heavily in the US now passed. Warren Buffet thinks so. For most this would mean stuffed with IT stocks – is that such a good idea. What of a Trump presidency? What will that do for the US market? Take away the magnificent 7 and the rest of the market doesn’t look that chipper. Fund managers shy away from the current real growth stocks – defence. Both is US and Europe.
Look at the indices over the last 5 yrs. The US didn’t runaway with it and a good global exposure seems to be the way to go.
All World Ex UK +62.39%
Euro Top 100 +40.05%
DAX +56.178%
CAC +53.19%
DOW +52.98%
Perhaps the whale has harpooned itself?
Harry, the Dow is not representitive of the US Market.
The Dow Industrial Average. Which would you choose as being representative?