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Adviser Fund Index: Spring fever

This month saw the spring rebalancing of the Adviser Fund Index, the first of two reviews due in 2009.

There have been some surprising changes, with several high-profile funds ejected from the index and some lesser-known vehicles entering for the first time. Absolute return funds have proved popular with the AFI panel of 19 financial advisers, with five such products featuring in the highest new entrants across the three indices.

In the aggressive index, CF Octopus Partner absolute return and Threadneedle absolute return bond are two new offerings. Sarasin Equisar global thematic, Newton UK opportunities and Threadneedle UK equity income are among the other most popular new entrants.

AFI balanced also includes the same offerings from Octopus, Newton and Sarasin, with Threadneedle absolute return and M&G corporate bonds also making an appearance.

The highest new entrants in the cautious index include Newton absolute intrepid and Allianz Pimco gilt yield.

A new panellist has also joined the AFI – AFH Independent Financial Services head of investment research Graham Toone, based in Worcestershire. Toone sees potential in absolute return.

“We are circumspect but interested. We see absolute return as a growing sector,” he says.

Hedge funds have been popular with institutional and high net-worth investors, but these vehicles are starting to become more widely available to the mass market, he adds.

“They have greater transparency so we are more comfortable with the new vehicles, but we would need experienced managers with a strong track record in shorting.”

The performance of BlackRock UK absolute alpha, managed by Mark Lyttleton, has impressed Toone along with many other advisers.

Gartmore’s recent launch for Roger Guy, a hedge fund specialist, is an interesting proposition, Toone says. “Cazenove’s Tim Russell had a wobble but performance has picked up now. We are keeping an eye on it,” he adds.

Whitechurch Securities investment manager Ben Willis has also been holding absolute return funds for some time. He says his firm went into BlackRock UK absolute alpha quite early, in 2007, after meeting the manager.

“We decided to incorporate it as a defensive measure in our cautious portfolios but it has now become a stalwart of any portfolio due to the current market environment.”

He also likes the Cazenove offering and has continued to hold it despite a slightly rocky period for the fund.

“Chris Rice’s fund had a blip in recent months but we are long-term holders of funds so we trust the longer-term judgement of the manager,” says Willis.


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