Cash and bonds topped up in run-up to US election

Cash and bonds topped up in run-up to US election

Advisers poured client assets into cash and fixed income last month as they looked to provide an extra layer of protection in the run-up to the US election.

Data from adviser platform FundsNetwork found bonds again proved to be a popular asset class among investors last month, with corporate bond, strategic bond, UK gilts, and global bonds sectors all featuring among the top 10 best-selling sectors.

However, it was the mixed investment 40 to 85 per cent shares sector which topped the sales chart in October, while the mixed investment 0 to 35 per cent and targeted absolute returns sectors took the third and fourth spots respectively.

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This was reflected in the best-selling funds list for the month, with eight of the top ten slots going to multi-asset or corporate bond funds. 

Fundsmith Equity and Lindsell Train UK Equity were the only equity funds to buck the trend, coming second and sixth place respectively.

Top 10 adviser sales by fund via FundsNetwork 
RankFund Name
1Aberdeen Short Dated Corporate Bond
2Fundsmith Equity Fund
3PFS Darwin Multi Asset Fund
4M&G Episode Income Fund
5Threadneedle UK Short Dated Corporate Bond 
6CF Lindsell Train UK Equity Fund
7Invesco Perpetual Global Targeted Returns
8Vanguard LifeStrategy 40% Equity
9Standard Life Investments MyFolio Market II
10BlackRock Cash Fund

Danny Wynn, head of fund partners for Fidelity International, said investors were bracing themselves for the US election.

Mr Wynn said: “October saw advice firms and their clients hold greater levels of cash and fixed income in their portfolios in order to add a layer of protection in case of any volatility resulting from the race to the White House.” 

Mr Wynn said it was “not surprising” that the beneficiaries were funds with a strong track record through recent turbulent times and limited exposure to the US.

Despite this, he said the markets reacted “rather benevolently” to the news that Mr Trump is set to become the next US president, particularly as equities soared.

“It will be interesting to see whether investors have poured into equities to take advantage of the rally that has taken place throughout November or whether they have continued to maintain a more defensive approach.”

Andrew Whiteley, director at Proviso Financial Planners, said the popularity of fixed income and cash is "part and parcel" of whether timing markets is a good idea for long-term investors.

"Most of our investors are long-term investors, so if we tried to second guess what are effectively short-term events then you have got a 50/50 chance of getting it wrong."

He pointed to the Financial Conduct Authority's asset management report, which he said backs up that theory that most active managers do not get it right consistently and are not providing their clients with good returns.

However, Mr Whiteley said he was surprised advisers were moving into bonds, adding: "There is as much risk in fixed income markets at the moment than most equity markets."