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Adviser groups remove UK property funds, FE fundInfo data shows

4 March 2020

Adviser groups are reducing their exposure to UK property following the high-profile suspensions of the M&G and Prudential UK Property funds last year.

According to the latest data from the FE fundinfo Adviser Fund Index (AFI), six adviser groups have removed IA UK Direct Property funds from their investor portfolios across all risk profiles. In total, ten funds in the sector were removed, including Threadneedle’s UK Property Authorised Investment IGA, L&G’s Property Feeder and M&G’s Property Portfolio funds, marking the highest from a single sector within the index.

Oliver Clarke-Williams, portfolio manager, FE Investments, said: “The suspension of M&G and Prudential underlines the issue of liquidity in the sector and with the FCA looking at the nature of open-ended funds and investor redemptions more broadly, some wealth managers have evidently seen more trouble ahead for the sector.”

The Index, which is rebalanced twice a year, also revealed a decline in popularity of targeted absolute return as an investment strategy, with wealth managers removing six funds from the sector from their portfolios. Those who lost their place in the index included Jupiter’s Absolute Return, LF Odey’s Absolute Return and Premier’s Defensive Growth funds.

Increased exposure elsewhere in UK

In contrast, interest in the UK has remained a key focus area for wealth managers, the data has shown. The IA UK All Companies, IA Equity Income and IA UK Smaller Companies sectors all saw wealth managers increase their exposure, with 18, 9 and 6 funds added respectively to the index. Among those added were JPM’s UK Equity Core, Jupiter’s UK Special Situations and Threadneedle’s UK Mid 250 ZNA.

FE Investments said the continued strength of equities, both in the UK and globally, underpinned this trend. Both the IA Europe Excluding UK and the IA Global sectors also found favour with wealth managers, with 16 and 11 funds added respectively.

Clarke-Williams added: “Equities have been an interesting story throughout 2019. Our panelists’ weighting in the asset class is largely a reflection of the impact of continuing low interest rates, which looks set to extend well into 2020. In terms of the UK, equities here have persistently lagged global markets and are sitting on fairly low valuations at the moment. The increased weighting in the index suggests that many wealth managers are hoping that now the uncertainty around Brexit appears to have diminished somewhat, UK equities will rerate in line with other developed markets.

“Overall, while last year was undoubtedly a tough year for some sectors, wealth managers largely saw 2019 as one of opportunity and this is reflected by the fact that we saw 137 funds added to the AFI, with just 57 removed in return.” See table below.

FE fundinfo AFI – Overall funds added and removed by groups in past 6 months

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