FE AFI panellists hike risk and cut exposure to UK in latest rebalance

LONDON, 4 FEBRUARY 2019: The 19 financial advisers and wealth managers on the FE Adviser Fund Index (AFI) panel have hiked risk across all three indices in this month’s bi-annual rebalancing by increasing exposure to global and emerging market equities, whilst trimming UK positions.

Exposure to the IA Global sector was upped across all indices – by 1.18% for the FE AFI Aggressive, 1.46% for the FE AFI Balanced and 1.92% in the FE AFI Cautious.  For medium risk investors, IA Global Emerging Markets exposure was doubled (from 1.4% to 2.82%) and a position in IA China/Greater China was initiated (1.18%).  Exposure to both sectors was also increased for the higher risk category.

Brian Dennehy, director at Dennehy Weller & Co and FE AFI panellist, explains: “The key with China is that there is great short-term value, and the long-term potential continues to be under-estimated in the West, which is far too influenced by a US-led anti-China narrative. Extreme negative sentiment is invariably a good time to buy.”

The FE AFI indices provide a snapshot of how the UK’s leading advisers are positioning portfolios for investors with different risk tolerances.  Every six months, FE collects fund and asset allocation recommendations from its exclusive panel of advisers and wealth managers to suit high, medium and low risk investors.  These allocations – drawn from current advice given by panellists to their own clients – are amalgamated into the FE AFI Aggressive, FE AFI Balanced and FE AFI Cautious indices. 

Panellists reduced home market bias by cutting UK assets across all three indices. Positions were trimmed by 2.68% in the Aggressive index taking overall exposure to the UK to 27.78%, whilst the reduction was 3.60% for the Balanced, moving the total to 28.31%, and a 0.90% haircut for the Cautious index shifted exposure to 24.44%. Positions in TB Amati UK Smaller Companies were cut completely across all indices whilst Fidelity Special Situations, GVQ UK Focus, Neptune UK Mid Cap, Schroder Institutional UK Smaller Companies and Slater Growth were cut from two of the three.

Oliver Clarke-Williams, portfolio manager at FE, said: “What’s striking about the latest AFI index rebalance is the risk-on nature of the changes. This suggests that the consensus of our panellists is that following the market correction, investors can afford to notch up the risk exposure in their portfolios."

“Brexit is the most obvious reason for the shift away from UK assets. For many, UK assets now look cheap compared to other developed markets providing a great value opportunity. Clearly, in the eyes of AFI panellists the risks still outweigh the considerable upside potential. It will be interesting to see if this remains in six months’ time when hopefully there will be far more certainty around the UK’s position.”

Other shifts seen across multiple indices include a trim to the IA Targeted Absolute Return allocation, down 2.21% and 1.51% in the FE AFI Cautious and Balanced indices respectively. IA Sterling Strategic Bond positions were also reduced by 2.6% for low risk, and 2.56% for medium investors.

Ordered by position size, the five most popular funds chosen for aggressive investors were: JOHCM UK Dynamic, Baillie Gifford Japanese, CRUX European Special Situations, Liontrust Special Situations and Schroder Asian Alpha Plus.

At the other end of the spectrum, for cautious investors, panellists preferred: Jupiter Strategic Bond, Jupiter Absolute Return, Artemis Global Income, M&G Global Macro Bond and Janus Henderson UK Absolute Return.

Ryan Lightfoot-Brown, research analyst at Chelsea Financial Services and FE AFI panellist, commented: “As one of only two global funds in our Cautious portfolio, Artemis Global Income is underweight US and overweight Europe and Emerging Markets, giving us exposure to the areas we believe are the best value. We believe manager, Jacob de Tusch-Lec, will capitalise on the considerable yield opportunities following the market sell off to provide a solid total return going forward.”

The top five fund picks for balanced investors included a mix of the top funds suggested for high and low risk investors - CRUX European Special Situations, Jupiter Absolute Return and Jupiter Strategic Bond alongside Fundsmith Equity and TwentyFour Dynamic Bond.

NOTES TO EDITORS

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FE is a leading international provider of data and technology to the asset management and wealth management industries, with clients ranging from the world’s largest asset managers and banks to financial advisers and distributors. FE connects these groups to enable better informed investment decision making, providing data, documents, tools, research, ratings and model portfolios service. In November 2018, FE joined forces with two fund data businesses based in Europe ꟷfundinfo (Switzerland) and F2C (Luxembourg).  This combination harnesses the complementary capabilities, reach and resource of each firm, increasing the breadth and depth of the client offering and positioning the firm for rapid international growth. FE employs c.600 people across UK, Switzerland, Luxembourg, India, Australia and other European and Asian centres.