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A boost for bonds

Panellists upped the allocation of bonds in the Balanced Adviser Fund Index during the November rebalancing. Cazenove UK Corporate Bond, L&G All Stocks IL Gilt Index, M&G Strategic Corporate Bond and Standard Life Global Index Linked Bond joined the benchmark, as the fixed-income weighting grew by 4 per cent.

Baring Directional Global Bond, L&G Dynamic, New Star Sterling and Newton International Bond – previously added to the index – also received additional support from single advisers. However, M&G Optimal Income achieved the highest weighting of any bond fund, as four panellists selected it for their portfolios.

Increased bond exposure coincided with a significant reduction in the UK equity weighting. Despite the addition of Dimensional UK Core Equity, Investec UK Special Situations and JPM UK Dynamic, the allocation to domestic shares fell by 6 per cent to 28 per cent. BlackRock UK Dynamic, Old Mutual UK Select Mid-Cap, Rensburg UK Select Growth Trust and Standard Life UK Equity Unconstrained were ejected from the index.

Continental European equity exposure also declined 1 per cent as Artemis European Growth, Odey Continental European, JPM Europe Dynamic (Ex-UK) and SVM Continental Europe were removed. Just one continental European fund – Schroder European Alpha Plus – gained extra support.

North America and Asia Pacific equity weightings rose by one percentage point to 10 per cent each.

As in the aggressive index, North America was boosted by a higher weighting for Martin Currie North American. This saw the £450m portfolio enter the top 10 list of most popular funds. UBS US equity received support from one extra adviser, almost doubling its weighting. Just two American funds – Franklin Templeton Mutual Shares and Pru North American – were ejected.

Several country-specific funds bolstered the benchmark’s Asia Pacific weighting. Single advisers selected Gartmore China Opportunities, M&G Japan Smaller Companies and Schroder Tokyo. Increased interest in Japan in the aggressive index was mirrored in the balanced AFI. Four panellists selected SG Japan CoreAlpha – compared with two in the May rebalancing – causing it to rise from number 83 in the weightings table to 21.

However, the most significant move within the table was the ascent of First State Asia Pacific leaders to first place. The £1.5bn portfolio run by Angus Tulloch and Alistair Thompson, was selected by seven advisers, up from six in May.

The selection of emerging markets funds run by Aberdeen and Axa Framlington further boosted the Asia Pacific weighting. Aberdeen Emerging Markets had allocations of more than 5 per cent in China, Hong Kong, India, South Korea and Taiwan at the end of October. Axa Framlington Emerging Markets held over half of its assets in Pacific equities.


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