Advisers are no longer viewing inflation as a threat, despite fears of a potential resurgence following the introduction of US trade tariffs, according to research from Square Mile.
Its quarterly Market Intelligence Report found searches for inflation protection continued to decline in the first quarter of 2025, accounting for just 3.8% of searches.
Research into capital preservation also fell over the quarter to 15.4%, a drop of 3.4 percentage points on the previous quarter.
In contrast, the report highlighted a marked jump in demand for funds with the potential to deliver income. Searches for income-related strategies accounted for 42.3% of all views, an increase of nearly five percentage points on the fourth quarter.
Capital accumulation came in second place, with a 38.5% share.
Square Mile’s quarterly MI also showed that equities were once again the most viewed asset class, with a share of 59.4% in the first quarter, up slightly from 58.1% in the previous quarter, while research into fixed income funds came in second place, followed by multi-asset strategies. However, alternatives and property as asset classes barely came on to advisers’ radar at 1.2% and 0.1% respectively.
Meanwhile, the TwentyFour Sustainable Short Term Bond Income fund was the most viewed responsible investment fund in the first quarter, accounting for 10% of all fund views. It was the second most viewed fund overall, after the WS Havelock Global Select fund.
The WS Amati UK Listed Smaller Companies fund was the third most researched fund, suggesting that UK small cap stocks might once again be a consideration for fund selectors, having been firmly out of favour for several years, Square Mile said.
With a 9.3% share, the IA UK All Companies was the second most viewed IA sector over the quarter, after IA Global at 15.7%. UK-focussed fixed income strategies were also popular with the IA Sterling Strategic Bond sector coming in third place at 8.7%.
Scott Dakers, senior business development director at Square Mile, said: “After two years of delivering exceptional returns, US stocks finally fell in Q1, with declines seen in both tech and consumer discretionary sectors. Talk of trade tariffs started to emerge too, which also began to act as a drag on performance.
“In contrast, European names started to outperform, in part due to defence and infrastructure spending plans announced by Germany but also due to inflows as investors rotated out of US names.
“Over the English Channel, larger UK equity names enjoyed a good quarter, but questions over the general health of the UK economy impacted the performance of small and mid-sized companies. Nonetheless, the fact that IA UK Companies was the second most researched IA sector might suggest that advisers are reconsidering their exposure to the domestic market as the sheen wears off the US and the relative undervaluation of UK equities becomes increasingly apparent.”
In addition, Square Mile’s report found that among asset management groups, Havelock was the most researched at 6.8%, with Schroders and Jupiter making up the remainder of the top three groups.
Meanwhile, Aviva Investors was the favoured firm offering risk-targeted solutions with an 18.8% share, pushing Liontrust into second place with 14.1%.
Vanguard maintained its position as the most popular passive investment house, accounting for a third of all views (33.2%), followed by Legal & General Investment Management and BlackRock (22.8% and 12.5% respectively). However, the Fidelity US fund was the most researched passive strategy overall with a 3.6% share.
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