View more on these topics

Advisers recommend cutting bond exposure in latest AFI rebalancing


Cautious investors should lower their exposure to fixed income and lift weightings to UK equities, according to the latest rebalancing of FE’s Adviser Fund Index.

Financial advisers sitting on the FE AFI panel recommend that cautious investors allocate 34.78 per cent of their portfolios to bonds, down from the 38.27 suggested when the Cautious index was last rebalanced in February.

Jupiter Strategic Bond fund is the top recommendation on the AFI Cautious index. The following four – Newton Global Higher Income, L&G Dynamic Bond, M&G Optimal Income and M&G Global Dividend – also have an income focus.

Investors have become increasingly bearish on the future prospects for bonds, which have seen exceptionally low yields in recent years, after speculating that the Federal Reserve will soon start to ease the pace of its $85bn-a-month quantitative easing programme and predicting a ‘great rotation’ from fixed income into equities.

Earlier this week, Morningstar OBSR investment strategist Andy Brunner said: “With economic recovery hopefully underway and the US Fed contemplating a gradual decline in bond purchases, the era of extraordinarily low bond yields is now over.

”While yields could ease back near term on any disappointment with the US recovery, the long term trend is for higher yields and probably negative returns in real terms.”

Panelists lifted the AFI Cautious index’s allocation to UK equities, moving it from 21.97 per cent to 25.60 per cent. JOHCM UK Opportunities, JOHCM UK Equity Income and Artemis Income were some of the most popular choices for this exposure.

Increased allocations to UK equities were also recommended for the AFI Aggressive and Balanced indices. The Aggressive index now includes at 31.18 per cent weighting to the asset class, up from 28.80 per cent, while the Balanced index has been lifted from 25.72 per cent to 28.80 per cent.

Axa Framlington UK Select Opportunities, Lindsell Train UK Equity and Standard Life Investments UK Equity Unconstrained were the most popular picks for aggressive investors. Balanced investors are pointed in the direction of Lindsell Train UK Equity, Axa Framlington UK Select Opportunities and JOHCM UK Opportunities.

In total, 43 fund have been added to the three AFI indices, including Artemis Strategic Bond, Baillie Gifford Japanese, BlackRock UK Special Situations, Henderson UK Property and Old Mutual UK Smaller Companies.

Meanwhile, 31 have dropped off the indices, with BlackRock UK Income, First State Global Emerging Markets LeadersInvestec Enhanced Natural Resources, Neptune Income and Schroder UK Alpha Plus being among them.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm