The latest rebalance of the FE Adviser Fund Index series has seen 16 funds added across all three portfolios, with several well-known UK equity funds among the panellists’ new positions.
At the latest rebalance of the FE Adviser Fund Index (AFI), funds such as Liontrust Special Situations, Threadneedle UK Equity Income and Artemis US Absolute Return have been backed by financial advisers for aggressive, balanced and cautious investors.
Panellists submit up to a maximum of 10 funds for each portfolio, which are weighted and explain the inclusion of some low- or high-risk funds in the aggressive or cautious portfolios.
During the first half of the year, the FE AFI Aggressive index was up by 12.79 per cent, while the Balanced and Cautious portfolios rose by 10.56 per cent and 8.25 per cent respectively.
Performance of FE AFI portfolios during H1 2019
Source: FE Analytics
Following the latest rebalance 60 new funds were added to the FE AFI list, with around a quarter included in all three portfolios.
While the UK equity market continues to lag its international peers, there were a number of strategies focused on the domestic market added to the portfolios at the latest rebalance.
One of the best-known new funds making the list was the £5bn, five FE Crown-rated Liontrust Special Situations fund, managed by FE Alpha Managers Anthony Cross and Julian Fosh.
The fund follows the firm’s ‘Economic Advantage’ process that aims to identify companies with a durable competitive advantage allowing them to defy industry competition and sustain a higher than average level of profitability for longer than expected.
The approach has made significant returns over the years and has made a total return of 16.56 per cent during the first half of the year against a 13.07 per cent gain for the average IA UK All Companies peer and a 12.97 per cent gain for the FTSE All Share index.
Another peer is the £928.8m Investec UK Special Situations fund – overseen by Alastair Mundy, head of Investec’s value team – which has made a total return of 11.78 per cent over the same period, despite the style being out of favour.
There are also two UK equity income funds tipped across all three portfolios: Royal London UK Equity Income and Threadneedle UK Equity Income.
The £2bn Royal London fund is overseen by Martin Cholwill and has made a 13.12 per cent total return during the first half, while the £4.2bn Threadneedle UK Equity Income fund – managed by Richard Colwell – is up by 9.73 per cent.
Source: FE
Two absolute return funds were also added across all three portfolios: Artemis US Absolute Return Hedged and Natixis H2O Multireturns.
The £510.3m, four FE Crown-rated Artemis US Absolute Return fund is currently managed by FE Alpha Manager Stephen Moore – set to be replaced by William Warren – and is US equity long/short strategy.
Meanwhile, the £418.4m Natixis H2O Multireturns, managed by Jeremy Touboul and Vincent Chailley, takes a multi-asset approach to absolute return investing aiming to outperform the one-month sterling Libor rate by 4 per cent per annum over three years.
The Artemis fund – which targets a positive return over the long term – has made a total return of 0.4 per cent during H1 while the H2O strategy is up by 2.27 per cent.
There were also several bond strategies added to all three of the portfolios, albeit from different sectors, as the chart above shows.
These include: Allianz Strategic Bond, managed by Mike Riddell and Kacper Brzezniak; the £5bn global bond strategy, Dimensional Global Short Dated Bond; and, the four FE Crown-rated Threadneedle Dollar Bond strategy overseen by Alasdair Ross.
There were also two passive strategies introduced across all three portfolios: ETFS Physical Gold and HSBC American Index.
Source: FE
However, there were also a number of funds taken out of all three FE AFI portfolios following the latest rebalance, as the above chart shows.
There are several big names on the list including Fiona Rowley and Justin Upton’s £3.1bn M&G Property Portfolio. However, FE Alpha Manager Mark Barnett’s £3bn Invesco Income fund was also taken out, as was the £2.4bn M&G Global Dividend – overseen by Stuart Rhodes, John Weavers and Alex Araujo – and the £1.5bn Schroder US Mid Cap fund, managed by Robert Kaynor.