Square Mile’s quarterly Market Intelligence Report published today registered a marked resurgence in adviser interest in funds with the potential for capital accumulation, following a drop off in research into such strategies in Q2 2024.
According to Square Mile, searches for capital accumulation funds stood at 45.9% in Q3, an increase of 7.4 percentage points on the previous quarter, putting this outcome once again ahead of income which registered a 42.6% share.
The report also suggests that, following several months of favourable data, advisers no longer see inflation as a major concern; funds that offer a level of inflation protection were the least researched, accounting for a mere 4.9%. Capital protection as a search term also dropped by three percentage points to 6.6%, perhaps confirming a return to a more ‘risk on’ environment.
Square Mile’s quarterly MI Report is a detailed register of viewing patterns among advisers using the Academy of Funds, a depository of insight and opinion on all 386 active, passive and risk targeted funds and investment trusts* rated by the company’s team of 21 analysts. It provides an indication of sentiment among fund selectors towards investment outcomes, funds and fund groups and asset classes.
With a share of 14.5%, the most viewed active fund overall was once again WS Havelock Global Select although this was a slight decrease on the previous quarter. However, below pole position there was a new run of funds with Premier Miton Diversified Dynamic Growth rising 6.5 percentage points to take second place (6.6% total share). Notably, three funds completing the top five could be considered alternative strategies with the Janus Henderson Absolute Return, BlackRock Gold and General and FTF Clearbridge Global Infrastructure funds in third, fourth and fifth place respectively.
There was also a change of guard in the most researched responsible investment funds. The M&G Positive Impact fund, a new entry to the Square Mile Academy of Funds in July 2024, was the most viewed overall, accounting for 12.1% of all searches. This was followed by three fixed income strategies with the BlueBay Impact Aligned Bond and CT UK Social Bond funds sharing second place at 9.7%, and abrdn Global Corporate Bond Screened Tracker in third place with a 9.2% share.
Boutique fund house Havelock maintained its position as most viewed fund group at 10.6%. However, both Premier Miton and M&G Investments rose strongly to second and third place, accounting for 6.4% and 6.0% of all searches respectively. Among asset management companies offering risk targeted solutions, Aviva Investors witnessed a significant spike in interest with its share of all views increasing by 27.1 percentage points, placing it at the top of the table. Rathbones remained in second place, despite registering a 10.5 percentage point uplift to 24.7%, while Liontrust dropped from first to third place with a 10.3% share.
At a sector level, IA Global remained the most researched at 19.9%, considerably ahead of IA UK Companies which moved to second place at 9.7%, followed by IA Targeted Absolute Return and IA Flexible Investment which rose 4.3 and 6.4 percentage points respectively to share third place at 8.0%. However, within the passive universe, funds in the IA Global Corporate Bond sector saw a major spike in searches of 40.8 percentage points, accounting for almost half (43.6%) of passive funds views per IA sector. This was significantly ahead of IA UK All Companies which was in second place with 7.8% and IA North America at 7.1%.
Scott Dakers, Business Development Director at Square Mile, said, “With the latest data from the Office of National Statistics putting CPI at 1.7%, below the Bank of England’s 2% target and lower than market expectations, it seems that the inflation genie, if not completely back in the bottle, has been reined in significantly. It is unsurprising, therefore, that the percentage of advisers using the Academy of Funds to research inflation protection strategies has dropped to 4.9%, down from a peak of 17.4% in the first quarter of 2022, according to our latest MI Report. However, the mixed bag of strategies comprising the top five researched funds, from global equities to commodities to infrastructure, would indicate that fund selectors are seeking to introduce greater diversification to client portfolios against an economic backdrop which continues to present uncertainties.
“With the Fed, ECB and the Bank of England all now starting to cut interest rates, the stage looks set for fixed income assets to once again come back into favour, both to mitigate equity risk and as source of positive returns. This is perhaps reflected in the significant interest in passive global corporate bond funds. Nonetheless, short term volatility across asset classes looks likely continue as market participants remain sensitive to both geopolitical risk and fresh economic data. This underlines the importance of maintaining a suitable time horizon when committing money to markets. All funds within the Square Mile Academy of Funds have undergone rigorous assessments by our analysts and have demonstrated their potential to deliver on their long-term objectives.”
