Professional investors turned their attention to US equity, absolute return and UK funds during September, our analysis of FE Analytics research trends suggest. 
As has been the case with much of 2018, September threw up some challenges for investors – not least the move by US president Donald Trump to hit China with more trade tariffs and heighten concerns that the world faces a drawn-out trade war.
Against this backdrop, few fund sectors were able to generate decent returns for their investors. FE Analytics shows that only seven of the Investment Association’s 40 peer groups ended September with their average member in positive territory.
IA Japan, IA Global Emerging Markets Bond and IA Japanese Smaller Companies were only sectors to make more than 1 per cent, although IA Sterling High Yield, IA UK Direct Property, IA Targeted Absolute Return and the two money market sectors posted small average gains.
Source: FE Analytics Market Intel Tool
In this article, however, we wanted to find out what the financial advisers, discretionary fund managers and other professional investors on FE Analytics were researching in September and how this compared with the previous 12 months.
As the chart above shows, the biggest shift in interest was towards the IA North America sector. The peer group’s members accounted for 4.01 per cent of the Investment Association research activity on FE Analytics over the previous 12 months but this climbed to 4.91 per cent in September.
While the US has been the instigator of the tensions between itself and its major trading partners, most notably China, many investors expect the US market to continue to perform strongly. Indeed, recent Bank of America Merrill Lynch Global Fund Manager Surveys have shown that many professional asset allocators have been increasing their overweights to the US of late.
Of course, the risk of a trade war between the US and China has led to increased investor nervousness, which is reflected in the difficult progress made by markets in September. We can also see this in the fact that the IA Targeted Absolute Return sector benefited from the second largest increase in professional adviser interest during the month.
Investors were also paying more attention to UK assets last month, following an extended period when they were distinctly out of favour. Although recent positioning surveys show that asset allocators are still running heavy underweights to the UK, both the IA UK All Companies and IA UK Direct Property sectors were researched more in September.
The higher research share of the IA Sterling Strategic Bond sector, which came in fourth place, is likely down to moves by the likes of the Federal Reserve and the Bank of England to tighten monetary policy, leading to investors seeking the greater flexibility offered by strategic bond funds.
Source: FE Analytics Market Intel Tool
When we look at individual Investment Association funds, Fundsmith Equity was the one that saw the biggest rise in research last month. The fund is already very popular and is often the most researched on FE Analytics but it became more dominant in September, growing its share of overall research from 3.98 per cent to 5.25 per cent.
Vanguard LifeStrategy 60% Equity comes in second place. All five Vanguard LifeStrategy funds, which are automatically rebalanced multi-asset funds of underlying Vanguard index trackers, are popular options with investors and have become the mainstay of many advisers’ portfolios.
In third place is Baillie Gifford Managed, which is designed to act as a ‘one-stop-shop’ for growth investors. The fund draws on the expertise of the equity and bond teams at Baillie Gifford, which as a company has built up an impressive long-term track record.
Rathbone Ethical Bond has attracted plenty of interest over recent years thanks to its strong performance; the fund is currently top-quartile in the IA Sterling Corporate Bond sector over one, three and five years. The approach behind it combines top-down macroeconomic views and bottom-up credit selection, with an ethical overlay being the final step of its process.
The fund with the fourth-largest increase in professional investor research is Liontrust Special Situations. It has built up an attractive track record on the back of its ‘Economic Advantage’ process, which hones in on stocks possessing characteristics that rivals find difficult to replicate, such as intellectual property, strong distribution channels and significant recurring business.
In fifth place is Rathbone Global Opportunities. This is another solid performer, currently in the top quartile of the competitive IA Global sector over one, three and five years on the back of a bottom-up process that looks for businesses that are easy to understand and have control over their own destiny.
Source: FE Analytics Market Intel Tool
Our research also shows that the Investment Association sector with the biggest fall in research share on FE Analytics was IA Specialist. By its very nature, the sector is home to a very wide range of funds but the three with the largest falls in research were BlackRock GF World Agriculture, JOHCM UK Opportunities and BlackRock GF World Mining.
IA Unclassified, IA Global Bonds, IA UK Equity Income and IA Flexible Investment also saw a fall in professional investor research while the decline in IA China/Greater China and IA Global Emerging Markets Bond can be explained by trade war fears, the emerging market sell-off and the currency crises in Turkey and Argentina.
On an individual fund level, Jupiter European was hit with the largest fall in FE Analytics research activity. However, as mentioned in previous months, this is down to a moderation from the extremely high level of research it received in 2017; it is still the most heavily-researched IA Europe Excluding UK fund and the third most-researched fund from the whole Investment Association universe.