Lastly, shareholders do need to be wary when the management teams of mature, high-yielding companies come up with plans to retain cash to invest ‘for growth’ in areas outside the core competence. Balanced UK equity funds receive dividends from mature companies and invest some of that into smaller, faster growing enterprises.
The stock market has a few hundred years of efficiently allocating capital in this way (with a few hiccups). The record seems fairly good and probably state-led initiatives to raise UK capital investment levels would do more harm than good.
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Simon Edelsten was a global equity fund manager for more than three decades
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