Advisers eye absolute return and UK equity funds

UK advisers could be eyeing a market correction as they research absolute return funds, despite recent underperformance.

Products with a home bias also featured among the most researched funds, according to FE analysis, with UK equities making up over a fifth of the top-50 most researched funds.

Woodford Equity Income and Invesco Perpetual High Income were the UK-focussed funds that made it into the top 10, while Terry Smith’s £11bn Fundsmith Equity was the most researched product overall.

Top 10 most researched funds

Group

Name

Sector

Fundsmith

Equity

Global

Woodford

Equity Income

UK Equity Income

Stewart Investors

Asia Pacific Leaders

Specialist

Standard Life Investments

Global Absolute Return Strategies

Targeted Absolute Return

Invesco Perpetual

High Income

UK All Companies

Newton

Real Return

Targeted Absolute Return

Newton

Global Income

Global Equity Income

Jupiter

European

Europe Excluding UK

Artemis

Global Income

Global Equity Income

Jupiter

Strategic Bond

Sterling Strategic Bond

Source: FE

FE research analyst Robert Wilson says absolute return funds have generally not done their job of delivering positive returns regardless of market ups or downs over the last two years.

“With valuations stretched in many markets, investors are wary of a correction and even though absolute returns have struggled, investors are betting the environment is finally becoming more conducive to them,” Wilson says.

The FE analysis looks at the funds advisers were researching from January to September this year.

Fund analyst Tanvi Kandlur says advisers are sticking to what they know.

However, she notes the research into Woodford Equity Income is likely due to the fund’s recent underperformance.

Kandlur adds: “Research has shown that investors tend to be biased towards their home country so it is not surprising that advisers researched mostly UK funds.

“Investors tend to be more comfortable with their home market and invest there despite better investment opportunities being available elsewhere.”