The panel of 19 advisers ejected 28 funds from the lowest risk index and added 25, bringing the total number of holdings to 97.
Several equity income funds were removed from the index, including Liontrust first income, which was previously selected by two panellists. Even Neil Woodford’s £6.5bn Invesco Perpetual income fund did not escape unscathed. The fund remains popular with investors and featured in FundsNetwork’s top 10 list of best selling funds for April and May. However, AFI support for the fund has fallen from five advisers to two in the Cautious index. Woodford’s £9bn high income portfolio was also selected by two panellists.
Artemis high income, a fixed-income portfolio previously chosen by three advisers, was also ejected from the Cautious index. Despite this, bond funds were generally popular in May, as the Cautious AFI’s fixed-income allocation grew by 1 percentage point to 38 per cent. Baring directional global bond, L&G all stocks index-linked gilt index, M&G corporate bond, New Star extra high-yield bond, New Star fixed interest, Standard Life select income and Swip absolute return bond all joined the index.
Rowan & Co head of research Tim Cockerill was responsible for introducing New Star extra high-yield bond. He removed his 20 per cent weighting to Royal London corporate bond and split the allocation between the New Star fund and Invesco Perpetual corporate bond.
Cockerill says he likes James Gledhill’s diversified approach on the New Star portfolio. “The fund operates in the risky end of the high-yield market but because of its diversification, any blow-ups should have a minimal impact,” he says.
The Invesco Perpetual corporate bond fund was chosen by five advisers in May. However, another of Cockerill’s selections, Old Mutual corporate bond, retained its status as the highest weighted fixed-income fund in the Cautious AFI. This was despite falling into second place in terms of selections behind Aegon global bond which was chosen by seven panellists.
Artemis strategic bond was also popular and gained the support of five advisers, up from four last November.
Appetite for property remains subdued within the AFI. Retail property fund outflows have slowed in recent months, according to the Investment Management Association, but the panellists cut their allocation by 2 percentage points in May to 5 per cent. This followed a 3 percentage point reduction in November. Cash levels in the index increased by 1 percentage point.