Investments  

Equity reductions in holdings driven by general election

Equity reductions in holdings driven by general election

The majority of equity reductions came from UK equity funds, Natixis’ quarterly Portfolio Barometer revealed, with a “significant reduction” in equity holdings across all three portfolio types - conservative, moderate, aggressive - from Q4 2014 to Q1 2015.

The firm, which covers an analysis of 147 model risk-rated portfolios managed by UK financial adviser and wealth management firms in the three months from January to March 2015, found that the three portfolio types were based on the definitions given by the independent financial adviser firms themselves.

Natixis said that there were two main potential reasons why the majority of equity reductions came from UK equity funds.

Article continues after advert

The first of these was the tactical shift ahead of May’s general election and the second of these was a wider strategic shift to re-risk portfolios after five years of strong equity returns.

The research also showed that alternatives and global equities were the main beneficiaries of equity reductions.

In terms of fixed income, the research showed high levels of correlation found within mainstream fixed income fund sectors.

The main findings in the report showed that advisers prefer corporate to government bonds amid ongoing duration risk fears, as well as a continuing search for yield.

The research also showed that flexible/unconstrained fixed income funds offer strong performance but view diversification benefits due to high correlations with corporate credit.

Finally, Natixis suggested that advisers may need to step out of the comfort zone to achieve proper diversification in fixed income allocations.

ruth.gillbe@ft.com