Volatility pushes advisers to defensive assets

Volatility pushes advisers to defensive assets

Advisers using the Fundsnetwork platform were buying volatility managed and other cautious funds in increasing quantities in November as market volatility increased.

Data released by the platform on Friday (November 30) showed global equity funds were the best sellers on the platform, followed by funds in the IA Volatility Managed sector and those in the Mixed Investment 40-85 per cent shares category.

None of the various UK equity sectors featured among the top ten most popular, while investors were willing to shrug off the stark fall in US equities since the start of October, with the North America Equity sector the most popular regional equity market, and fourth most popular sector during the month.

The £1.8bn Baillie Gifford American fund was the best selling active fund for Isa clients on the platform in November.

The mandate is the top performer in the North America Equity sector this year to date, and over one, three and five years. But it has endured a torrid run since the start of October, losing 11 per cent in three months.

The best selling active fund for pension clients on the platform was the £5.4bn Lindsell Train UK equity fund.

Paul Richards, head of sales at Fundsnetwork, said: "The markets faced significant headwinds in October, with uncertainty over Brexit and fears of US trade wars with China continuing, so it is unsurprising to see strong flows into more defensive assets in last month’s sales data.

"We continue to see advisers and their clients allocating towards strategies that aim to manage and mitigate volatility."

But Paul Stocks, financial services director at Dobson and Hodge in Doncaster, said: "Our attitude to risk in client portfolios is set by each individual client’s attitude, not by prevailing market conditions.

"The only time we would deviate from the asset allocation we have is if a client is investing a particularly large sum of money and it is a particularly volatile time in markets. We have been using some more multi-asset funds and less specifically fixed income funds or equity funds, unless the client has a higher attitude to risk."