Professional investors continued to increase the amount of time spent researching passive multi-asset funds in February, analysis by FE Trustnet shows, while strategies run by the highly respected team at Lindsell Train also proved popular last month.
After a torrid 2018, the bull run that kicked off the new year continued in February. FE Analytics shows all but five Investment Association sectors made positive returns last month, with IA North American Smaller Companies making the highest at 4.88 per cent.
Despite the market rally, however, investors had a fairly cautious stance going into February. The most recent Bank of America Merrill Lynch Global Fund Manager Survey found that a net 44 per cent of asset allocators are overweight cash, while a net 46 per cent expect global GDP growth to weaken over the next 12 months.
Source: FE Analytics Market Intel Tool
In this article, we used the FE Analytics Market Intel Tool to discover what financial advisers, wealth managers and other investment professionals were researching more in February when compared with the previous 12 months. The above chart shows the change in research activity between these two periods on the Investment Association sector level.
The findings reflect the general sense of caution among professional investors, with the IA Volatility Managed sector emerging as the peer group that captured the biggest uptick in interest on FE Analytics. The peer group accounted for 5.5 per cent of Investment Association research in February, up from 4.6 per cent over the previous 12 months.
Greater interest in sectors such as IA Mixed Investment 20-60% Shares and IA Mixed Investment 0-35% Shares also hint a more defensive stance among investors, but there are some counter-points to this.
Riskier sectors such as IA Asia Pacific Including Japan and IA Global Emerging Markets Bond were being researched more heavily by the professionals last month, suggesting the environment wasn’t completely risk-off.
In addition, the IA Targeted Absolute Return sector – which claims to be the home of funds that will protect investors in difficult market conditions – was the peer group that was hit by the largest fall in FE Analytics factsheet views.
Turning to the individual funds that were being researched more in Feb than over the previous 12 months, Aberdeen Asia Pacific & Japan Equity sits at the top of the table.
Source: FE Analytics Market Intel Tool
The £111.3m fund had the 86th most viewed factsheet on FE Analytics over the 12 months to the end of January 2019, but it jumped into fourth place in February.
Aberdeen Asia Pacific & Japan Equity resides in the IA Asia Pacific Including Japan sector and is in its bottom quartile over the past five years. However, performance has been stronger over shorter time frames and has made the peer group’s highest total return over both three and six months.
But the above table – which shows the 30 Investment Association funds with the largest increases in FE Analytics research share in February – reveals how passive multi-asset funds were once again the month’s big winners.
The fund with the second largest increase in research activity – Vanguard LifeStrategy 60% Equity – is one of these funds. It is part of the highly popular Vanguard LifeStrategy range (which are automatically rebalanced multi-asset portfolios built from Vanguard trackers) and has outperformed its average IA Mixed Investment 40-85% Shares peer over one, three and five years.
Indeed, four of the other members of the Vanguard LifeStrategy range are among those with the biggest increases in their shares of FE Analytics factsheet views. All have outperformed their average multi-asset peer over one, three and five years as well as over shorter time frames; they also benefitted from a significant rise in research activity in January.
Several other passive multi-asset funds saw their share of FE Analytics factsheet views grow last month, including Standard Life Investments MyFolio Market III and L&G Multi-Index 5.
However, some resolutely active funds were being viewed more than usual by the financial advisers and other professionals on FE Analytics. Good examples are the Lindsell Train Global Equity and LF Lindsell Train UK Equity funds, which are some of the best-performing members of their sectors thanks to a long-term quality-growth approach to investing.
Source: FE Analytics Market Intel Tool
Some well-known funds also saw their total share of FE Analytics factsheet views decline in February, with LF Woodford Equity Income taking the biggest hit. The fund, headed up by veteran Neil Woodford, has been one of its peer group’s worst performers over recent years and has suffered hefty outflows.
Merian Global Equity Absolute Return is another large fund (its assets under management are $12.1bn) but it has also seen a setback in performance, losing 7.26 per cent over the year to the end of February 2019. This compares with a fall of 2.01 per cent from its average IA Targeted Absolute Return peer.
It’s a similar story with Artemis Global Income, which had a very strong run in the years after its launch in 2010 but has dropped into the IA Global Equity Income sector’s bottom over the last 12 months.