The number of advisers searching for funds offering inflation protection is rising, according to new data.
Searches for inflation protection funds accounted for 14.5 per cent of all searches within the academy of funds in the three months to the end of December last year, according to Square Mile’s Market Intelligence Report, released on Friday (January 14).
This was a 10 percentage point increase on the previous quarter, when it was the least researched outcome.
The most researched investment outcome
Investment outcome | Share of views |
Capital accumulation | 39.5% |
Income | 32.9% |
Capital preservation | 13.2% |
Inflation protection | 14.5% |
UK inflation hit 5.1 per cent in November, the highest 12-month inflation rate since September 2011, according to the Office for National Statistics.
This led the Bank of England to raise interest rates to 0.25 per cent in an effort to curb the rise in inflation.
The rise in inflation also led to interest in fixed income funds continuing to fall, as its share of searches fell 2.5 percentage points to 27 per cent.
The IA sterling strategic bond sector, which was the most viewed in Q3, fell to third place in Q4, losing 5.6 per cent of its hold on searches.
Jock Glover, strategic relationships director at Square Mile, said: “In the bond markets, fears of more persistent inflation and central banks being forced to raise interest rates to combat it continued to move government bond yields higher.”
Given this challenge, he said, it was unsurprising that adviser interest in fixed income continued to weaken over the quarter.
“While capital accumulation continues to be the most researched investment outcome, its lead is being eroded by inflation protection and capital appreciation, suggesting a growing sense of caution among advisers as they research investment options for their clients."
Equity remained the most popular asset class, with 51.7 per cent of views, followed by fixed income with 27 per cent and mutli-asset with 20.1 per cent. Alternatives received 1 per cent of views, with property searches down at 0.2 per cent.
However, the Artemis Corporate Bond Fund rose from 48th place to the most-searched for fund with a 6.1 per cent share of all searches. This helped Artemis Fund Managers to be the most searched-for group, followed by Schroders and Premier Miton.
Chris Jones, proposition director for Dynamic Planner, told FTAdviser in a podcast earlier this month that it’s going to become more important to look more closely at stocks now that the market is beginning to shift.
“Since 2008 we’ve had falling interest rates and gilts going up and large caps doing well so it didn’t really matter where you invested because all the indices and markets were going up,” he said.
Through the pandemic, he continued, the market saw a free market economy which had fundamentally changed.
“It will mean there's an increase in active performance…you need to be looking at the underlying instruments - you can no longer say UK equity does this or US equity does that…you have to look under the bonnet.”
Views per IA sector Q4 2021
Rank | IA Sector | Change from Q3 2021 | Views in Q4 2021 |
1 | Mixed Investment 20-60% Shares | +4% | 11.8% |
2 | UK Equity Income | +1.2% | 10.4% |
3 | Sterling Strategic Bond | -5.6% | 10.2% |
4 | UK All Companies | -1.4% | 8.4% |
5 | Sterling Corporate Bond | +7% | 8.2% |
6 | Asia Pacific Ex Japan | +0.9% | 7.5% |
7 | Global | +0.4% | 7.5% |
8 | Targeted Absolute Return | +3.2% | 6.4% |
9 | Japan | -4.2% | 4% |
10 | Flexible Investment | -3.7% | 3.5% |
sally.hickey@ft.com
