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Season 11 sees mixed fortunes

Adviser Fund Index

Season 10, which ran between May 1 and October 31, 2009, proved to be a highly successful period for the AFI as the aggressive, balanced and cautious indices comfortably outpaced their rivals. Did they repeat the trick in season 11?

In short, the picture is mixed. All three indices generated positive returns in the six months ending April 23 and beat their equivalent Investment Management Association’ sectors by less than one percentage point.

However, the indices lagged the Association of Private Client Investment Managers and Stockbrokers portfolios, with underperformance greatest in the aggressive benchmark.

On asset allocation, America contributed positively during the period, as the country’s stockmarkets outperformed other regions.

The IMA’s North America and North American smaller companies sectors made gains of 19 per cent and 26 per cent respectively and the best-performing fund across the AFI indices was Dimensional US smaller companies, which returned about 31 per cent.

Indeed, five of the top 10 funds in the aggressive index specialise in American equities and include products run by Schroders, M&G and UBS. American funds also feature prominently in the six-month balanced and cautious performance tables.

AWD Chase de Vere investment research manager and AFI panellist Justine Fearns says she added “a healthy dollop” of American equity exposure to her selections during last November’s rebalancing.

Her preferred choices in the region are Martin Currie North American and Neptune US opportunities, which appear in all three AFI indices.

Fearns says the funds have suffered spells of underperformance over the past year but she remains confident in their managers and processes.

“From here on in, they are probably both well positioned to benefit if market volatility continues and there is a focus on large names with strong franchises and big brands,” she adds. “Our American funds did not go all guns blazing but I am still happy with them.”

Other IMA sectors that performed well over the period include technology and telecommunications (which gained 22 per cent), Japan (up by 16 per cent), Asia Pacific including Japan (up by 14 per cent) and global emerging markets (up by 13 per cent).

The only IMA sector to fall in value was UK gilts but this had a limited impact on the AFI – just one gilt fund appears in the indices. A more significant drag came from the absolute return sector, which gained 2 per cent but accounted for six of the 10 worst-performing funds in the aggressive index. Five of the funds have fallen in value over the past six months.


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