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Adviser Fund Index

Absolute return funds and bond portfolios were the big winners among cautious investors in last month’s Adviser Fund Index rebalancing session.

Panellists boosted the fixed-income allocation in the AFI Cautious benchmark by four percentage points, and added several funds from the Absolute Return sector.

As a result of the changes, bonds eclipsed equities in the index for the first time. British, continental European, American and other international equity weightings fell by between one and three percentage points, reducing overall equity exposure to 41 per cent. The fixed-income allocation, meanwhile, rose to 43 per cent.

M&G strategic corporate bond saw the biggest allocation increase of any fund, as support for the £800m portfolio grew from one adviser to four. Its weighting rose by 3.5 percentage points, taking it to third place in the list of most popular funds. M&G corporate bond also joined the index, following its selection by two advisers.

Other fixed-income portfolios that were added to the benchmark included Allianz Pimco gilt yield, Jupiter corporate bond and Schroder strategic bond – each chosen by single panellists. Invesco Perpetual corporate bond, Standard Life global index linked bond and Cazenove UK corporate bond received higher weightings.

Ben Willis, an investment manager at Whitechurch Securities, kept his fixed-income allocation stable, at 40 per cent, but removed Baillie Gifford corporate bond and Aegon global bond, because of their exposure to financials. Willis maintained the weighting by adding 10 per cent allocations to Jupiter corporate bond and Schroder strategic bond.

“We already had exposure to high yield and financial sector bonds through Invesco Perpetual monthly income plus, so we took some risk off the table,” says Willis. “Jupiter corporate bond is plain vanilla, with a sensible, risk-controlled approach, and the Schroder fund is generally risk-averse.”

Willis also kept his absolute return allocation steady, with 10 per cent weightings in BlackRock UK absolute alpha and Cazenove UK absolute target. However, other panellists used the rebalancing as a chance to diversify their exposure to the £1.5bn BlackRock portfolio. Three advisers removed the fund from their selections, causing its overall weighting to fall by 2.6 percen- tage points.

Panellists added five other funds from the Investment Management Association’s Absolute Return sector to the index – CF Octopus Partner absolute return, Gartmore European absolute return, L&G diversified absolute return trust, Newton absolute intrepid (due to be rebadged Newton real return later this month) and Threadneedle absolute return bond.

Turnover in the Cautious index hit 19.8 per cent in May, as panellists ejec- ted 19 of the 96 funds they selected last November. They added 23 new holdings, increasing the total number of constituents in the benchmark to 100. Newton was the biggest beneficiary, with three additions, followed by Jupiter, Neptune and Threadneedle, with two.


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