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Advice firms increase UK equities use mixed with caution

3 February 2021

Equities started to gain traction among advisers in the fourth quarter of 2020 as the market continued to trade at record highs, new data from Quilter has revealed. 

Analysis of Old Mutual Wealth’s data showed quarterly net flows into UK equities rose by 12.9% during the final three months of the year, while European and North American equity inflows rose by 10% and 9.3% respectively.

According to Quilter, much of these flows appeared to be driven by the deployment of cash, a trend that has been evident since the build up of funds following the first quarter of 2020. Property funds also saw sustained outflows following the reopening of a number of funds that had previously been suspended.

Yet, despite the growth in equities allocation, advisers are continuing to err on the side of caution by allocating large sums to fixed interest funds. The UK fixed interest sector saw net inflows of 47.7% over the quarter, as advisers sought to maintain defensive qualities to client portfolios, the firm said.

Andy Miller, investment specialist, Quilter, said: “Markets have not only recovered but started to soar in recent months. However, we are still living in precarious times and advisers are acutely aware that volatility is never far from the door and have set their client’s portfolios up accordingly.

“With the costs of a third lockdown still uncalculated and the impact of the vaccine rollout yet to filter through, the economic outlook is still difficult to predict. However, more positively some of the other unknowns like the US presidential election and Brexit are now clearer giving investors a better view of the horizon.

“This has allowed many advisers to begin adding risk back to portfolios and increasing exposure to equities in order to capture the rally. With monetary policy remaining loose for some time and global risks removed from the table, we would expect this trend to continue into the first quarter of this year.”

Miller added: “Despite this, advisers are acutely aware of what could come after last year’s events and have constructed their portfolios to reflect the fact that 2021 still looks set to be unpredictable.”

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