Welcome to Asset Allocator, FT Specialist's newsletter for wealth managers, fund selectors and DFMs. We know you're bombarded with information, so each day we'll be sifting through the mass to bring you what you need to know, backed up by exclusive data and research.
The flow show
The figures are in. A tumultuous October for risk assets was reflected in the most popular fund buys and sells of the month - but not necessarily in the way you might think.
Some results were as you'd expect: the biggest funds, having more to lose in terms of assets, duly did so. So there was more pain for Gars, which shed another £1.1bn.
October also confirmed that M&G Optimal Income is firmly in net outflow mode once again - a further £1bn followed the £440m that left in September.
Most of the others to be hardest hit were, inevitably, trackers. The sell-off here was pretty indiscriminate; iShares' overseas government bond, corporate bond and North American equity products all lost £200m or more.
On the other hand, several equity trackers also featured among the most popular funds. And not everyone was moving away from US stocks. Vanguard's US index fund took in £100m, and one active offering did even better.
Strikingly, the tech-heavy Baillie Gifford American fund enjoyed its best month for flows in more than a decade, according to Morningstar. It took in more than £150m, a clear sign that at least some fund selectors saw buying the dip as the best option.
Not all allocators took such a rosy view of things. Investec Global Gold saw a record month for inflows, taking in £82m as some investors fled to safety.
The overall conclusion is that more of investors' money was up for grabs: the number of funds losing at least £50m doubled month-on-month, but there was also a 50 per cent rise in the number of funds taking in that amount or more. More big decisions may lie ahead in future.
Divi doubts
The land of the rising sun has been touted by many as the land of the rising dividends ever since the start of Abenomics back in late 2012. True enough, dividend growth rates in the country have exceeded those for all other major markets in recent years.
But it's about where you come from as much as where you're going. We've heard for years from some quarters of the UK equity income sector that dividend growth is more important than starting yield.
Japan, whose dividend growers have flourished recently, nonetheless shows there are limits to that thesis: starting yields are by and large still too low to gain the attention of fund selectors, according to our database.
That's partly because MSCI Japan yielded just 2.1 per cent as of the start of the quarter, and only around 10 per cent of its constituents yield 3 per cent or more.
You could also just look at the lack of options out there for those looking to tap into the dividend story.
Baillie Gifford launched an income and growth strategy in 2016, but the model portfolios we track still prefer the firm's growth and smaller companies options instead.
Another relatively recent launch, of the Coupland Cardiff Income & Growth open and closed-ended strategies, has had some success in capturing attention.
But these offerings simply encapsulate the fact that Japan remains a growth and income story rather than just the latter.
No (big) deal
Wealth managers are still pretty relaxed about Brexit. Those who are battening down the hatches tend to be doing so due to stretched valuations, tighter monetary policy, or trade war concerns. So global, not local, threats.
We've also seen DFMs shy away from letting their domestic allocations dwindle as UK equities struggle to keep pace with other regions.
Part of the reason for all the above is that many just don't believe a no-deal Brexit will happen. If politicians think otherwise, the idea is that markets will soon shake them out of their complacency.
So it's worth reading Wolfgang Münchau's statement in the FT this morning that no such thing will happen. His belief is that a no-deal Brexit wouldn't be a big enough worry for global investors to force the issue.
Some wealth firms will doubtless think the same. But for those who are banking on a "US Tarp vote in 2008" scenario - wherein the legislature votes against the deal before hurriedly rethinking in light of a collapsing market - the asset allocation implications of no deal are still worth considering, particularly after last week.
