Welcome to Asset Allocator, FT Specialist's newsletter for wealth managers, fund selectors and DFMs.

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Casting wider

Over the past 12 months we’ve charted fund selectors’ attempts to be more precise with their equity exposure – typically via increased allocations to specialist funds. More recently, we’ve discussed how wealth firms are increasingly spreading their bets more thinly. Our latest analysis casts a new light on that trend.

In years gone by, we’ve looked at the DFMs who have stood out from the crowd by opting to hold nothing in a given equity asset class. That's taken a couple of different forms – whether it be those who were brave enough to shun the US, or those who took the relatively simple decision to avoid areas like Europe.

But examples of both these trends are increasingly few and far between. As the chart below shows, the proportion of balanced portfolios opting for a zero-exposure approach has fallen markedly in almost every region.

This isn’t just about buyers growing more interested in global or specialist funds, or US equity holdouts capitulating and taking some form of exposure. DFMs are also now considerably more likely to hold Asia ex-Japan strategies, and they have warmed to Europe and Japan, too. Only EM encounters a similar degree of resistance, with one in five portfolios having no exposure here.

Regardless, the overall trend is clear: more discretionaries are now spreading their international equity allocations far and wide, rather than simply focusing on two or three core areas.

Wealth 2.0

The latest investment industry acquisition has again served to emphasise private equity’s burgeoning interest in the sector. Platforms, in particular, are in their sights: Parmenion’s acquisition by the relatively unknown Preservation Capital Partners follows a string of deals for the likes of James Hay (which then itself bought Nucleus), Wealthtime, and Novia.

But the interest isn’t confined to platform functions. Parmenion, of course, has a pretty hefty DFM arm, and platforms in general are increasingly looking to push into the discretionary portfolio space.

PE acquirers themselves have more than half an eye on the potential for growth on this front. PCP itself says Parmenion’s DFM proposition is a “critical component of value and growth potential”.

Those keen on taking market share won’t just be focused on conventional portfolios. This morning, the consultancy NextWealth has made a series of predictions about what the future may hold. The first is the integration of portfolio management with financial planning tools: “[more] DFMs will offer custody and platforms will offer portfolio management tools”.

Another forecast is more intriguing: the consultancy predicts “hyper-segmentation, not hyper-personalisation”. Rather than offering a different service to every client, the rise of white-labelled MPS allows discretionaries to provide a tailored service to advice firm clients, based on the latter’s client segments. Many DFMs already offer some form of this service already – and the suggestion is that a drive for greater specialisation doesn’t have to mean bespoke models for every client.

Trading up

As optimism over economic recovery grows, investors are turning to ETFs to ride the bounce. That’s the conclusion suggested by latest data from the ETF GI consultancy, which show ETF flows continuing to set new records. A record $140bn in new money last month beats the previous high set just four months ago in November.

How those flows compare with active fund interest is an open question - domestically, at least.

In the UK, data from the Investment Association shows that tracker funds were ahead of the pack again in January, taking in £2bn versus £1.2bn for active funds – this at a time when overall interest in equities dipped in relation to the previous month. We'll have to wait a little longer to examine UK buyers’ interest in ETFs: exchange-traded strategies are due to be included in the IA’s sectors for the first time as of next month, with more than 500 making the grade.