The majority of advisers are seeking capital accumulation amid the challenging economic environment, according to Square Mile’s latest quarterly Market Intelligence Report.
Capital accumulation accounted for over half (51%) of all searches for investment outcomes via the Academy of Funds in the third quarter, twice as many as those seeking income (25.5%).
However, while inflation continues to dominate headlines, Square Mile said research into strategies with the potential to hedge against inflation continued to fall, dropping to 11.8%, down from a peak of 17.4% in the first quarter of this year.
Of funds seeking to deliver capital accumulation, the Ninety One UK Alpha and Premier Miton Asset Distribution funds were the most popular, with each receiving a 2.5% share of all views. The R&M UK Recovery and Baillie Gifford Strategic Bonds funds made up the remainder of the top five most viewed strategies.
The consultancy group said the IA UK All Companies (13.7%) and IA Sterling Strategic Bond (9.5%) sectors remained the top two most searched for IA sectors, with the latter falling slightly on the previous quarter. However, IA Mixed Investment 20-60% shares and IA Targeted Absolute Return sectors continued to move up the rankings to third and fourth place, while IA UK Equity Income fell out of the top three to seventh place.
Square Mile’s fund dashboard, which advisers can use to access information across core fund selection criteria, also saw a reversal in search behaviour during the quarter. Use of the opinion pillar as a primary access point shrank from 36% in the second quarter to 27.6% in the third quarter, while advisers using the ESG pillar jumped from 26% to 36.2%.
The Wellington Global Impact Bond fund rose to the top of the Responsible Investment fund rankings, although its overall share was slightly down on the second quarter, the group said.
Jock Glover, strategic relationships director at Square Mile, said: “We have rarely seen a more challenging environment in which to make asset allocation decisions. In the UK, the new Chancellor of the Exchequer has reversed the tax cuts set out in his predecessor’s ‘mini-Budget’ in an attempt to restore confidence in the economy. Meanwhile, the cost-of-living crisis continues unabated, with mortgage holders facing the additional squeeze of spiralling interest rates as the UK’s central bank strives to dampen inflation.
“Globally, we see the ongoing conflict in Ukraine intensifying, the real prospect of recession in Europe and the spectre of covid-related lockdowns in China all adding to investor concerns.”
Against this backdrop, Glover said it was interesting to note that strategies with the promise of capital accumulation continued to gain traction, possibly as a result of weak market sentiment creating more upside to be had from assets offering some level of appreciation.
Glover added: “Nonetheless at a sector level, caution still lingers. The IA Mixed Investment 20-60% Shares and Targeted Absolute Return sectors are both fishing grounds for investors seeking a combination of growth alongside capital protection.”
