International equity, absolute return and global bond strategies are the offshore funds that professional investors have been researching most heavily this year, analysis by FE Trustnet can reveal.
The recently launched Calastone Fund Flow Index, which looks at the flows into and out of investment funds, last week showed that interest in offshore funds has “soared” since the UK voted to leave the EU. Past data from the index suggests that investors were focused on UK-domiciled funds up until May 2016.
“As soon as the UK voted to leave the European Union, the tide turned,” the report said, adding that there have been “significant net inflows to offshore funds” since June 2016.
Value of UK money flowing to offshore-domiciled funds
Source: Calastone Fund Flow Index
“In fact, offshore net inflows have totalled £53.1bn, averaging £1.8bn per month since the referendum. In the year before the vote, the monthly average was just £150m, less than a tenth of the post-referendum level.
“The expected loss of passporting for the UK’s financial services industry, which allows firms to operate friction-free in EU markets, coupled with uncertainty about the UK’s regulatory future, and perhaps also nervousness about Britain’s unstable political situation, have driven investors to consider moving their capital outside the country.”
Given this, we wanted to find out which offshore funds the financial advisers, wealth managers, paraplanners and other professional investors using FE Analytics have been researching the most. To do this, we applied the FE Analytics Market Intel Tool to the FCA Recognised universe.
The table below shows the 30 most-researched offshore funds on FE Analytics and, as can be seen, Merian Global Equity Absolute Return has taken the top spot. In fact, the fund accounted for 0.642 per cent of all the research carried out on FE Analytics this year, out of more than 6,300 products.
Merian Global Equity Absolute Return is managed by Ian Heslop, Amadeo Alentorn and Mike Servent – the team behind a number of successful long-only and market-neutral global equity funds at Merian (which recently rebranded from Old Mutual Global Investors).
The $14bn fund uses a quantitative investment process that aims to exploit inefficiencies in global equity markets; over the past five years it has generated a 24.32 per cent, which is the highest in the FO Absolute Return sector (where the average member has lost 8.71 per cent).
Source: FE Analytics Market Intel Tool
The FE Invest team has Merian Global Equity Absolute Return on its Approved List and said: “Although being complex, the investment process is robust and has successfully achieved its performance targets, in very different market conditions, since 2010.
“The team has identified specific sources of alpha in global equity markets, which do not depend on the direction of the market, industry or country exposures. As such, the fund is an excellent diversifier as its capacity to outperform does not depend on traditional sources of alpha.”
Allianz Income and Growth is the second most-researched offshore fund among the professionals using FE Analytics in 2018. Managed by Doug Forsyth, the $31.8bn fund targets both capital growth and income over the long term through a portfolio built around US and Canadian stocks, high-yield bonds and convertibles.
It resides in the FO Mixed Asset – Cautious sector and has made 21.76 per cent over the past three years, ranking it second out of 88 funds; over this time frame, its average peer made a total return of just 1.42 per cent.
In third place we have Michael Hasenstab and Sonal Desai's $14.6bn Templeton Global Bond fund. Franklin Templeton’s fixed income division is one of the largest in the world and this portfolio is managed by the global sovereign team, which comprises more than 20 investment professionals.
Templeton Global Bond has an unconstrained and its flexible mandate means that the managers look at add value through a number of sources, including both duration and currency, as well as the more standard current income and the potential for capital appreciation in a bond.
The fund is in the FO Fixed Interest – Global sector’s third quartile over three years but has moved into the top quartile on a one-year view.
Looking at the professionals’ offshore research trends in 2018 from a sector shows that the FO Equity – International sector has been the most popular, in keeping with the trend for investors to look outside of the UK for opportunities.
The FE Analytics Market Intel Tool shows that Lindsell Train Global Equity has been the most-researched member of this peer group, followed by BlackRock GF Global Equity Income, DWS Invest Top Dividend, Guinness Global Equity Income and Templeton Global.
Source: FE Analytics Market Intel Tool
The second most-researched peer group has been FO Absolute Return and, as already noted, Merian Global Equity Absolute Return has attracted the most interest. Insight Absolute Insight Equity Market Neutral, Polar Capital UK Absolute Equity, Schroder ISF Emerging Markets Debt Absolute Return and Kames Absolute Return Bond have also seen plenty of research activity.
When it comes to FO Fixed Interest – Global, Templeton Global Bond is joined by the likes of Templeton Global Total Return, Natixis Loomis Sayles Multi Sector Income, Pimco GIS Global Bond and Vanguard Global Bond Index at the top of the research tables.
Our data also shows that the offshore sectors attracting the least research in 2018-to-date have been FO Fixed Interest - Emerging Markets, FO Fixed Interest – Other Single Long Maturity, FO Fixed Interest – Other Single Corporate, FO Fixed Interest – Other Single Securitised and FO Mixed Asset – International.