InvestmentsDec 11 2017

Advisers more worried about bonds than equities in 2018

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Advisers more worried about bonds than equities in 2018

More advisers are concerned about the outlook for defensive assets in 2018 than the prospects for growth assets, according to research by Royal London Asset Management.

The company surveyed 61 financial advisers and found a majority are more cautious on the outlook for assets such as bonds than for equities.

A big majority of advisers said capital growth was more important to their clients than income.

Phil Reid, head of wholesale at Royal London Asset Management, said: “With global stock markets touching all-time highs and bond yields still fairly low, many of our recent discussions with advisers have centered around how best to mitigate risk to client portfolios.

“Despite the current shift towards tighter monetary policy, we still think that there are many attractive opportunities available in fixed income, particularly in higher yielding, short duration assets.

“The active passive debate looks set to continue but as the results of this survey indicate, most advisers can see a place for both. Our GMAP range of multi asset funds reflects this view, combining both active and passive strategies across a range of asset classes.

“When it comes to sustainability, the survey results suggest this is still an area for growth within the industry. When we speak to advisers, it’s clear that sustainable investing is becoming a key part of the investment process for many firms.”

The research found only about 5 per cent of clients had a preference for sustainable or ethical investing.

Meanwhile two thirds of those surveyed used passive investments and of the remaining third, only 8 per cent don't plan to do so in the coming year.

Jonathan Davis, who runs Jonathan Davis Wealth Management in Hertford, said there were few signs that the strong equity market growth witnessed in 2017 is about to dissipate, but he expected inflationary assets to perform well.   

Meanwhile, the Hargreaves Lansdown investor confidence among its clients was at its lowest level since it began in 1995, despite the rising stock market.

The company said recent data showed investors were shunning UK equity funds because of political uncertainty.

Laith Khalaf, senior analyst at Hargreaves Lansdown, attributed the "disconnect" between investor sentiment and the performance of the markets to the large proportion of people who will be unhappy with the direction of the UK.

He said: "48 per cent of people in the UK voted to remain in the European Union, and it stands to reason that a good number of these are still probably pessimistic about the effect Brexit will have on the UK economy.

"The Brexit blues have compounded an already downbeat mood that has dogged sentiment since the financial crisis, following which investor confidence has been noticeably dampened.

"The impact of the financial crisis on investor confidence has been reinforced and prolonged by the Bank of England’s loose monetary policy. QE and low interest rates have both served as a reminder that the economy still needs support, while also creating doubt as to whether the bull market is built on solid foundations, or the quicksand of liquidity injected by central banks."

david.thorpe@ft.com