Square Mile MI report: IA strategic bond sector drives adviser interest in Q3 2021

  • IA Strategic Bond sector receives 15.7% of all views 
  • Aegon European ABS fund most viewed overall 
  • Inflation protection as an outcome not registering with advisers 

Adviser attention turned to funds within the IA Strategic Bond sector in the third quarter of 2021, according to the quarterly Market Intelligence Report released this week by Square Mile Investment Consulting and Research (Square Mile).  This sector accounted for 15.7% of all views over the quarter, putting it in first place, up from sixth in the previous quarter ahead of Global and UK All Companies, which sat in second and third place respectively.

In terms of views by asset class, Fixed Income as a whole dropped nearly by nearly 6% to 29.5% with Equities reaffirming its lead, accounting for 52%.  Nonetheless, interest in strategic bond funds was strong: the most viewed fund over the quarter was the Aegon European ABS fund with a 4.8% share, while the Schroder Strategic Credit fund was in third place at 4.5% of views.  This suggests that advisers are seeking fixed income solutions whose flexible mandates enable them to navigate more challenging bonds markets.

Two funds which were recently awarded Square Mile ratings, the LF Havelock Global Select fund (Positive Prospect rating) and Principal GIF Finisterre Unconstrained Emerging Markets Fixed Income fund (A rating), were among the most viewed, placing at fourth and sixth respectively.  Meanwhile, the top three funds by views within Square Mile’s universe of Responsible rated funds were the FSSA Greater China Growth fund (21.9%), the Wellington Global Impact Bond fund (10.7%) and the Threadneedle UK Social Bond fund (9.2%).  However, the newly rated Liontrust Sustainable Future Managed Growth fund range received significant attention, accounting for 9.1% of all Responsible rated fund views in aggregate, which also made Liontrust the most popular group for Risk Targeted solutions.

Despite concerns that the UK might be entering a prolonged inflationary period, inflation protection remained the least researched outcome at a mere 4.5%, down from the 6.8% share it registered in Q2.  Capital accumulation, however, continued to dominate although its share shrank from 59.5% to 52.2%, while income was the biggest mover, accounting for 32.8%, up from 20.3%.

Jock Glover Chief Operating Officer, Research and Consulting at Square Mile, said, “Developed equity markets ended Q3 at a similar level to where they started the quarter, but this disguises significant volatility over the period which saw major swings in sentiment. In the bond markets, fears of more persistent inflation and central banks being forced to raise interest rates to combat it, moved government bond yields higher.

“In light of this, it was perhaps unsurprising that the most popular IA sector by number of views was the IA Sterling Strategic Bond.  What is perhaps more surprising is that despite continued speculation over the upward trajectory of inflation, advisers continue to show little interest in funds whose objective is to mitigate this risk, suggesting that the prevailing expectation is that this will be a short-lived spike.”

See HERE to view a summary of the Q3 2021 Square Mile Market Intelligence Report.

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