Fund Spotlight: a UK fund that has consistently delivered

UK equities, particularly in the large-cap space, have been on a strong run throughout 2025. At the time of writing, the FTSE 100 is up 14.2% despite a backdrop of economic uncertainties, geopolitical tensions and concerns around the UK government’s fiscal constraints. From a developed market perspective, this falls just short of European equities, +14.7%, but far ahead of the US +2.8% in GBP terms.

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Looking ahead, the UK’s economic outlook for the rest of the year appears somewhat mixed. Domestic pressures remain, with inflation running above the 2% target, and GDP growth stalling. Last week, a divided Bank of England lowered interest rates to 4%. This cut aims to balance inflation control with economic growth, bolstering consumer spending and investment.

Despite this, UK markets have held up well, supported by a new UK-US tariff deal implemented in June. The solid performance of the FTSE over 2025 has started to close the valuation gap to global indices, however the UK equity market is trading at a significant discount to global peers, presenting an attractive entry point for long-term investors.

The JPM UK Equity Core fund is a core option for gaining exposure to UK equities, aiming to outperform the FTSE All-Share over the long termwithout making too material a divergence from the benchmark. The strategy is data driven, enhanced by the insights from an experienced team.

The fund is managed by the trio of Christopher Llewelyn, Richard Morillot and Callum Abbott. They are supported by a large analyst team within the broader international equity group at JP Morgan. Former long-term manager James Illsey retired in the spring of this year, although the team were well positioned for this transition.

What does the fund invest in?

This portfolio follows a benchmark-aware approach, meaning it stays broadly in line with the FTSE All-Share Index, while allowing room for small, deliberate shifts. The sectors with a large representation in the portfolio are Financials (23%), Industrials (19%) and Consumer Staples (15%) making it closely aligned to the benchmark. The tilts in the portfolio favour companies that the managers believe are likely to outperform, while reducing exposure to those they expect may lag behind.

The resulting portfolio has a strong bias towards large, well-established businesses. As of June 2025, the portfolio consists of 172 companies (versus around 550 in the FTSE All-Share) with an average market value of around £27 billion.

The investment team uses an active, bottom-up, team-based process designed to capture the benefits of three investment styles: Value (buying companies that look inexpensive); Quality (backing financially strong businesses); and Momentum (investing in companies whose performance is improving).

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• Watch our video: why UK shares can keep rising despite weak economy

Stock selection is guided by two main sources: quantitative research (data-driven screening) and fundamental analysis (deeper research, often involving company meetings and site visits). Quantitative tools help the team keep track of the broader market and quickly identify potential opportunities, while fundamental research is especially valuable for smaller companies that attract less analyst coverage. The result is a carefully balanced portfolio - rooted in data and refined by experience - that aims to stay disciplined while taking advantage of selective opportunities.

In terms of portfolio construction, the fund’s active positions - both in individual stocks and sectors - can be plus or minus 1% compared to the benchmark. In practice, the team typically limits this to 0.3% (30 basis points) to keep within its risk budget, targeting a tracking error (a measurement of how much a fund’s performance differs from the benchmark index) of 1% over time.

This means it aims to stay close to the FTSE All-Share while still allowing room for active decision-making. Examples of current overweight positions include Babcock International Group (LSE:BAB), the UK-listed defence services business, and Morgan Sindall Group (LSE:MGNS), the construction group.

How has the fund performed?

The strategy’s long-term performance has been impressive, especially given its highly benchmark-aware approach, low tracking error and limited active positioning. The fund has consistently generated marginal outperformance, driving robust long-term results.

On an annualised basis, the fund has posted a return of 7.2% over 10 years outperforming the FTSE All-Share’s return of 6.9%. The fund has also outperformed the benchmark and its peers within the Morningstar UK Large Cap Equity over one, three and five-year time horizons. This level of performance is noteworthy and would be highly satisfactory for many active managers with greater flexibility.

Morningstar Total Returns (GBP) to 31/07/2025. Past performance is not a guide to future performance.

Why do we recommend this fund?

This fund offers investors a broad exposure to UK equities managed by a well-resourced team with access to experts across the UK market-cap spectrum. With more than 170 holdings, the fund maintains substantial diversification across sectors and companies - helping to manage single-stock risk while allowing for moderate tactical positioning.

By following a structured and risk-controlled approach the team have been successful in providing consistent returns moderately ahead of the FTSE All-Share Index over the long term.

The current yield of the fund is around 3% and the fund is competitively priced at 0.32%, or an exchange-traded fund (ETF) version of the strategy is available, JPM UK Eq Core ETF Act GBP Acc (LSE:JUKC), at an even cheaper 0.25%.

This fund has a place on ii’s Super 60 list of investment ideas as a core UK Equity option.

Please find the latest factsheet here.