Advisers cut bond exposure despite continuing boom

Financial Express’s rebalanced Adviser Fund Index (AFI) has revealed that advisers cut their exposure to fixed interest in October, despite IMA data for the third quarter showing the bond boom continuing.

The fixed-interest component of an aggressive mandate fell four percentage points to 6%. In a balanced mandate it went down one percentage point to 26%, and in the average ­cautious allocation, two percentage points to 37%.

But the Investment Management Association (IMA) revealed that bonds as an asset class topped retail sales charts in September, with inflows of £348m. The £ Corporate Bond sector was the second most popular with £287m in sales, down from first place in August; £ Strategic Bond was fourth. (article continues below)

The highest-selling sector of the month and in the quarter as a whole was Global Bond. The sector has seen increasing interest as advisers look for alternatives to gilts and investment grade debt. Some IFAs have expressed concern over the latter asset classes because of monetary easing and possible inflation, according to a recent survey by Axa Investment Managers.

Advisers also bought into the Property sector, where funds can push up rents to adjust payouts for inflation.

Asia Pacific excluding Japan was the third most popular sector as advisers sought alternatives to stocks in the developed world, where fears for the economic recovery remain.

In the AFI, emerging markets occupied the top three slots in advisers’ aggressive allocations, with First State Asia Pacific Leaders first on 6%, Aber­deen Emerging Markets second on 3.5% and Ignis Hexam Global Emerging Markets third on 3%. The sector also contributed three new entrants to the AFI, the Aviva Investors Emerging Markets Local Currency Bond, Insight Absolute Emerging Market Debt and Martin Currie China funds.

Global Bond provided two new entrants, the Legg Mason Global Multi-Strategy Bond and Templeton Global Total Return Bond funds.

UK All Companies funds were most frequently ejected from the index, with popular funds Artemis UK Growth, JOHCM UK Opportunities, Old Mutual Select Mid Cap and BlackRock UK ­Special Situations all making an exit.

Overall, net retail sales in September hit £2.4 billion, lifting funds under management to a record £542.6 billion.