Investment company purchases on adviser platforms up 22% in Q1

Investment company purchases on adviser platforms up 22% in Q1

Purchases of investment companies on adviser platforms rose 22 per cent in the three months to March to reach a new high of £368m.

The figure set a new record and compared with £301m in the previous quarter, according to data compiled by Matric Financial Clarity for the Association of Investment Companies.

The figure also marked a 35 per cent increase on the first quarter last year, when £273m was purchased.

The number of firms buying investment companies between January and March this year was 1,882, including 1,730 financial advice firms and 51 wealth managers.

It was the highest number since the third quarter of 2016 following the EU referendum and suspension of several open-ended property funds, with equity and alternatives such as property and infrastructure among the most popular sectors.

Nick Britton, head of intermediary communications at the AIC, said demand for investment companies via adviser platforms began to recover towards the end of last year.

“The latest available data shows that this trend continued into the first quarter of 2021, setting a new record,” he added.

“Meanwhile, the number of firms using investment companies is the highest it’s been since 2016, and if you exclude the spike in the third quarter of that year when several open-ended property funds were suspended, it’s the highest ever. 

“The most popular sectors include a mix of equity and alternatives such as property and infrastructure, demonstrating that advisers are seeing a broad range of benefits in the investment company structure.”

The most popular sectors for purchases on adviser platforms in the first quarter this year were global, with 18 per cent, UK equity income, with 7 per cent, and global smaller companies, with 6 per cent.

Infrastructure also saw a 6 per cent share, while flexible investment saw 5 per cent, as did UK commercial property.

However, the AIC said looking at net demand, the most popular sector in the period was commodities and natural resources.

The AIC said this was caused by concerns about inflation prompting advisers and wealth managers to increase their clients’ exposure.

Last year, 91 per cent of UK equity income investment companies either increased or maintained their dividends, compared with 4 per cent of open-ended funds in the equivalent IA sector.

The next most popular sector by net demand was global smaller companies, followed by infrastructure, global equity income and Asia Pacific.

The UK equity income sector saw positive net demand in the period after three consecutive quarters of net selling on adviser platforms.

Transact remained the most used adviser platform for these purchases, with around 43 per cent of purchases carried out on the platform.

FundsNetwork handled 14 per cent of purchases, with Ascentric managing 11 per cent and 7IM 9 per cent.