This year is likely to be far trickier for UK equity investors than 2009, according to Georgina Taylor, equity strategist at Legal & General Investment Management.

Speaking at a LGIM Fundamentals briefing, Taylor (pictured) said that last year UK equity investors were rewarded for choosing to invest in equities, almost regardless of which part of the market they placed their money.

This was because equities staged a broad-based recovery from March onwards following the heavy sell-off which occurred as a result of the credit crunch.

Predicting a more subdued economic outlook in 2010, Taylor said that equity gains for the market as a whole are likely to be far more modest.

However, she also distinguished between the economy and the equity market.

“It is important also to note that the UK equity market performance is no longer simply dependent on the UK economy. More than 70 per cent of UK FTSE 350 company sales now come from outside the UK. So the fortunes and earning power of UK companies are greatly influenced by factors such as the strength of the global economy and the value of sterling.”

Taylor highlighted a number of risks which UK companies face including: the fragility of the UK recovery; high government debt levels, pushing up the risk free rate; and a rise in the cost of capital across the private sector.

Despite these risks, Taylor said there will be opportunities for attractive returns from those UK companies who have pared costs during the downturn and are now likely to be highly cash-generative.

In addition, larger companies with greater exposure to the expected higher growth emerging markets are likely to outperform.

“Where as in 2009 it was a case of just investing in the market, spotting these companies will be the key to earning good investment returns in 2010,” Taylor added.