November’s rebalancing of the FE AFI balanced index shows panellists have been allocating more money to the UK over the past year while weightings to international regions continued to shrink.
Allocations to the UK decreased from November 2009 to November 2010 but since then they have increased from 42 per cent to 45 per cent, gaining two percentage points at the latest rebalancing. Allocations to the rest of the world have fallen from 58 per cent to 55 per cent since November 2010.
FE AFI panellists have noticed the trend. AFH Independent Financial Services head of research Graham Toone says: “Because of all the uncertainty, people might be favouring sterling denomination more than the likes of the euro.”
However, equity weightings seem to contradict regional allocations. UK equity weightings fell by 2 per cent from 27 per cent to 25 per cent at the latest rebalancing. European and US equities lost 1 per cent while Asia Pacific equities and cash were both up by 1 per cent.
In the sector breakdown, financials, which have not moved in terms of allocations since rebalancing in May 2010, fell by 1 per cent in November’s rebalancing, taking the sector’s weighting from 9 per cent to 8 per cent.
During the period between rebalancing in May and November this year, several problems have emerged to affect confidence in financial firms.
These trends have also played out in the fixed-income sector, where banks form a substantial portion of benchmark indices for corporate bond funds in particular.
There was a sharp increase in allocations to “other” fixed interest over the last year, climbing by 3 per cent to 10 per cent in May’s rebalancing and by 2 per cent to 12 per cent in November.
Corporate bonds have witnessed a directly opposing shift. Allocations fell by 4 per cent to 15 per cent in May and 3 per cent to 12 per cent in November.
It came as little surprise that M&G, one of the broadest and highest-performing fixed-income providers, featured strongly in the top five funds chosen by panellists at November’s rebalancing.
In order, the top five were Legal & General dynamic bond, First State Asia Pacific leaders, M&G property portfolio, M&G optimal income and M&G global basics.
The placing of the three funds puts M&G as the single top provider in the balanced index.
The top five funds rejected at rebalancing were Sarasin globalSar IIID, Investec sterling bond, Cazenove UK corporate bond, Threadneedle UK property and Thames River sterling global bond.
Data supplied by FE