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Why have investors gone a-fishing?; The importance of doing the splits

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Going fishing

Given the times we are in, it is no surprise that investors are casting their nets as widely as possible right now.

The latest fund flows data from the Investment Association shows Global Equity Income funds attracted the largest net inflow in April of £678mn, but the main action during that month was the gentle ebb away from equities.

Fixed income funds had outflows of just £18mn in April; this was small fry compared with the £3.3bn investors pulled from the asset class in March.

But a sitting-on-the-fence theme is reflected throughout the rest of the data. The Mixed Investment 40-85 per cent shares sector is the second most popular, with net inflows of £468mn, and the Volatility Managed sector, which attracted net new subscriptions of £440mn, is the next most popular.

This trend is also reflected in our own database, which shows allocators have increased exposure to funds that are neither fully equity or fully bond, categorised by Asset Allocator as “Other” in their balanced portfolios.

The data shows an increase from 17 per cent to 19 per cent exposure over the past three months. 

It has been a good quarter for the Liontrust Diversified Real Assets fund, a mandate that has gone from being in none of the portfolios on our database to being the jointly most popular multi-asset fund in three months, as two allocators added it. 

This is a £342mn fund run by the Liontrust multi-asset team, and has returned 7 per cent over the past year, compared with its sector, which has posted an overall loss.

The fund’s outperformance (as outlined in the graph, below) may be explained by the top 10 holdings being replete with gold and commodity exposure, as well as inflation-linked bonds. 

The long-established Trojan fund, run by Troy Asset Management, is also held in two allocators’ portfolios, while the same company’s Personal Assets investment trust is held in another portfolio.

The focus at Troy is very much on preserving the real value of capital, something that, with inflation where it is, has an obvious appeal for allocators.

Doing the splits

Regular readers of Asset Allocator might recall that a week or so ago we had a chat with DFM Copia Capital.

An interesting fact to come out of this conversation was that Copia's private equity owner Anacap Financial Partners is looking to register it as a separate entity.

Copia is currently part of Novia, which is a platform business bought by Anacap in 2020, and which will shortly rebrand to Wealthtime.

After the split, Copia and Novia will be separate entities but the latter will continue to be the parent of the former.

The reason for the split is to allow Anacap to potentially sell Copia and Novia/Wealthtime separately when the time comes for it to realise its investment.

The fact Anacap thinks that Copia could become sufficiently attractive to be sold off on its own strikes us as another example of how strong the ranks of mid-tier DFMs is becoming, as they provide growing competition to the bigger players in the sector.

It looks as though there will be plenty of demand around to meet that increased supply, as data from consultancy Cerulli shows approximately half of advisers expect to use model portfolios more extensively in the coming years, compared with only 2 per cent who intend to reduce their allocation to the space.

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