UK markets have underperformed for a long time, and dramatically so over the past year. But why is this? Has the time now come to look again at British shares?

One factor is the self-inflicted wound of Brexit. Share prices in London rose steeply in the immediate aftermath of the 2016 referendum vote because the value of the pound fell sharply against other currencies, artificially inflating the value of global profits for UK reporting firms. But the years of political instability which followed created a poor environment for business investment, and the eventual terms of exit have done little to restore confidence.

The impact of the Covid pandemic highlighted a more important factor - the composition of the index. The FT100 is all value and very little growth. It remains stacked with legacies of Empire like banks, insurers, oil, mining and tobacco firms. Some great consumer goods players appear alongside supermarkets, leisure companies and housebuilders, representing the strengths of the British economy and its unusually consumer-driven nature. Crucially, there is very little tech. It's a kind of pandemic anti-portfolio.

However, now that the end appears in sight, is it time to look again at the UK market? By any measure, it is undervalued. After a very difficult year the UK vaccination programme is proceeding remarkably well, and the prospects for a bounceback of the consumer economy look reasonable. If investors are looking to rotate back into value stocks then there are a lot to be had here.

The difficulty perhaps is that absent the pandemic, the fundamentals affecting the main UK market haven't really changed. Buying FT100 or All-Share trackers still involves owning a lot of broken banks and unfashionable resource extractors. They aren't going to suddenly become exciting, but they can offer a useful counterweight to tech-heavy US funds in a portfolio. One interesting variation might be the FT250, which gives you the 'next 250' companies after the FT100.

For UK investors wanting a bit more asset risk without currency risk, there's also LSE's Alternative Investment Market, AIM. It's here that you'll find ecommerce success stories like ASOS and Boohoo, Fevertree's mixer drinks, and several representatives of the UK's vaunted biotech sector. There's no tracker available for a market with a long tail of small and illiquid shares but iShares MSCI UK Small Cap ETF offers good exposure to the best bits.