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Adviser Fund Index

The departure of some big names from fund groups has seen some well known groups dropped from the Adviser Fund Index portfolios during the May rebalancing.

Among the casualties are many industry stalwarts, including Baillie Gifford, Close Investments, Franklin Templeton, Insight, Liontrust, Rathbones and Skandia.

After the rebalancing in November 2007, the three portfolios included 169 separate funds from 54 different find groups.

The latest rebalancing has seen the three portfolios shrink to 147 funds from 48 separate groups ,suggesting advisers are progressively choosing from a narrowing pool of funds.

“The past 18 months’ climate has shown up a real differentiation in performance,” says Chelsea Financial Services managing director and AFI pan- ellist Darius McDermott.

“Anyone can pick a fund in a bull market but not everyone can pick funds in a bear market.”

James Davies, an investment research manager at Chartwell, says it is solid investment logic that has resulted in the groups’ expulsion from the AFI.

“Our view on Liontrust, for example, was very straightforward,” he says. “Jeremy Lang ran 90 per cent of the group’s money in his funds and there was a very high-profile disagreement with the management.”

Lang tendered his resignation to the group in January along with William Pattisson. Between the two they ran just over 3bn of the 3.4bn of the total assets under management.

“Would we feel comfortable investing our clients’ money there? The answer is no,” says Davies.

McDermott says that while he is not surprised about the narrowing of choice during a bear market he would expect the reverse to start occurr- ing once advisers feel the market has started to turn.

One strong sign of that this might already be tentatively happening is the inclusion of four new British equity funds into the AFI during the rebalancing.

Davies agrees but says it is too currently too early to be starting to look past the crisis as the industry could undergo further upheavals before a recovery sets in. “My feeling is that we probably haven’t seen the last of it,” he says. “We are still likely to see further changes.”


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