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Meet the new funds that advisers say any investor can hold

04 February 2019

We find out which funds have just been added to all three portfolios that are part of the FE Adviser Fund Index.

By Gary Jackson,

Editor, FE Trustnet

More than 20 funds have been added to FE Adviser Fund Index portfolios in the latest rebalance, with UK and global equities as well as property being the most common new entrants.

At the latest rebalance of the FE Adviser Fund Index (AFI), funds such as Schroder RecoveryVeritas Global Focus and Threadneedle UK Property have been tipped by financial advisers for aggressive, balanced and cautious investors.

The FE AFI is made up of the recommended portfolios of a panel of leading UK financial advisers, based entirely upon the funds they recommend to their clients.

There are three portfolios in the range: FE AFI Aggressive, which comprises funds suitable for a person in their late 20s, FE AFI Balanced with funds for someone in their mid 40s and FE AFI Cautious, made up for funds for a person in their late 50s. There’s an underlying assumption that the client will retire at 65.

Performance of AFI portfolios over 10yrs

 

Source: FE Analytics

In this week’s rebalance – which also saw the addition of four new members to the AFI panel – 85 new funds have been added to the AFI list. Some 25 of these funds have been included in all three of the AFI portfolios.

Despite depressed sentiment towards the home market, three UK equity funds have been added to the list: two from the IA UK All Companies sector and one IA UK Equity Income member.

Kevin Murphy and Nick Kirrage’s Schroder Recovery is one of the IA UK All Companies additions. Despite the value style being out of favour for much of the past decade, the £1.2bn fund has made a top-quartile total return of 287 per cent over 10 years, beating the FTSE All Share by more than 100 percentage points in the process.

Baillie Gifford UK Equity Alpha is also in the IA UK All Companies sector’s top quartile and ahead of the index with a 221.60 per cent 10-year return. Managed by Gerard Callahan, the £376.9m fund has a bias towards quality growth names and the portfolio focuses on six baskets of stocks: stable growth, technology, oil majors, international cyclicals, domestic cyclicals and financials.


Standard Life Investments UK Equity Income Unconstrained is the only IA UK Equity Income fund to be added to all three FE AFI portfolios in the rebalance. The £1.3bn fund, which is run by Thomas Moore, looks for unloved companies with the potential for positive change and dividend growth.

Three members of the IA Global sector have just been added to the FE AFI Aggressive, Balanced and Cautious portfolios. The largest of the three is the £2.6bn Veritas Global Focus fund, which is headed up by the FE Alpha Manager duo of Andrew Headley and Charles Richardson.

Headley and Richardson look for quality companies that display strong competitive advantages, high cash generation, and talented management. The portfolio is concentrated with between 25 and 40 holdings, with little in the way of turnover.

The other two global funds joining all three AFI portfolios are Brown Advisory Global Leaders and Lazard Global Listed Infrastructure Equity.

 

Source: FE

Another area that has seen several additions to the AFI is UK direct property. With three open-ended funds – Commercial Freehold, L&G UK Property Feeder and Threadneedle UK Property Authorised Investment – and one trust – Schroder Real Estate – being deemed attractive to aggressive, balanced and cautious investors.

Threadneedle UK Property has assets under management of £1.5bn and has been run by Gerry Frewin since May 2016. The portfolio is managed with an emphasis on sustaining the income stream and Frewin looks for high-yielding assets, which do not look too risky.

Schroder Real Estate is one of two investment trusts to be added to the three AFI portfolios in the rebalance (the other being BMO Private Equity). It is run by Duncan Owen and Nick Montgomery, who concentrate on ‘winning cities and regions’ whose growth is expected to outperform national averages.


As the table above shows, several regional funds have been added to the FE AFI Aggressive, Balanced and Cautious portfolios: two Asian equity funds, two global emerging markets, two Japan and one US.

There’s also one specialist portfolio: Sarasin Food & Agriculture Opportunities, which looks for winners in the global food and agriculture space. Manager Henry Boucher tends to focus on consumption rather than production, arguing that the consumer end of the food chain provides the most opportunity for consistent returns.

Two exchange-traded products have also been put into the three AFIs. Vanguard Global Value Factor UCITS ETF has an active quant strategy that gives exposure to stocks with lower prices relative to their fundamental measures of value while iShares Physical Gold ETC introduces gold to the three portfolios.

 

Source: FE

Of course, some funds have been removed from the FE AFI during the rebalance. In total, 37 funds have been taken out of at least one of the portfolios and three used to be in all three AFI but are no longer in any.

L&G Japan Index Trust is the largest of the three by some margin, as it has assets under management of £1.3bn. TwentyFour Monument Bond is £712.3 in size, while £201.2m is run by TB Amati UK Smaller Companies.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.