Adviser Insights

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From the category archives: Sector reports

A Spotlight On: IA Targeted Absolute Return

A Spotlight On: IA Targeted Absolute Return

In the first quarter of 2020, broad measures of UK equity performance were down by about 25%. The manager of a UK equity fund which has that benchmark, and which was down by ‘only’ 20% over the same period therefore achieved very good performance, even though investors in that fund lost a lot of money. Managers of absolute return funds have no such place to hide. Their benchmark is cash which, unless you are in the eurozone or Switzerland but not so far in the UK, cannot deliver a negative return. Managers of absolute return funds are therefore aim to deliver positive returns in absolute terms over reasonable timeframes, irrespective of what is happening in stock or bond markets.

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A Spotlight On: IA Europe

A Spotlight On: IA Europe

Despite significant uncertainties in terms of the outlook, for investors with a long-term horizon who are looking at European equities, such unprecedented times can bring opportunities. Europe is home to thousands of listed companies. These include global businesses and more domestically focused companies, some more sensitive to the economic cycle, others less so. For investors focusing on companies with market capitalisations of more than 500 million euros, there are circa 1400 stocks at the present moment.

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A Spotlight On: IA Global

A Spotlight On: IA Global

As at the end of February 2020, the Investment Association (IA) Global sector comprised of 339 funds with a combined level of assets totalling in excess of £250bn. To meet the IA’s requirements, funds in the sector must invest at least 80% of their assets in global equities, and not qualify for a UK or other regional sector. Global equity funds that yield a premium to the MSCI AC World Index fall into the IA Global Equity Income sector. Investors should also be mindful that although a separate IA Specialist sector exists, some non-traditional global equity funds, such as infrastructure and commodity related funds, do find their way into the peer group.

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A Spotlight On: Gilts and Index Linked Gilts

A Spotlight On: Gilts and Index Linked Gilts

These two sub asset classes, investing solely in the debt of the UK government, have traditionally delivered steady income to investors, with investors able to receive either a fixed rate of income in the gilt market or an inflation adjusted income in the index linked market. Combine these income streams with the negatively correlated capital returns both sub asset classes have provided when equity markets have fallen and it is easy to see why the sectors have traditionally been a key component of diversified portfolios for UK investors.

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A Spotlight On: IA Asia Pacific excluding Japan

A Spotlight On: IA Asia Pacific excluding Japan

There are the obvious attractions to the Asian region, such as favourable demographics, growth in urbanisation and economic expansion. The region is home to a varied selection of countries with a broad range of economic and political characteristics. This includes wealthier, highly developed nations such as Japan and Korea as well as those which are in the early stages of their development such as Pakistan and Vietnam. The region also includes countries with strong demographics and a consumption hungry middle class such as China and India.

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A Spotlight On: Corporate Bonds

A Spotlight On: Corporate Bonds

The IA Sterling Corporate Bond sector is possibly one of the more straightforward sectors which the IA have put together. Funds must invest at least 80% of their assets in investment grade corporate bonds denominated in, or hedged back to, sterling. Nonetheless there is a range of funds in the sector, with more or less flexibility around duration and credit quality. This is a relatively large sector, encompassing close to 100 funds and some £85bn of assets, and therefore gives investors plenty of choice whether they wish to invest in a tracker fund or something more active.

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A Spotlight On: Multi-Manager Funds

A Spotlight On: Multi-Manager Funds

Over the last few years there has been an enormous amount of cost pressure on the financial services industry and asset managers have largely felt the brunt of this, with many cutting their fees to remain competitive. No other genre of fund has felt this more fiercely than the ‘traditional’ multi-manager fund. When we refer to a ‘traditional’ multi-manager fund we mean here a fund which invests predominantly in actively managed funds from across the whole of the market, not those which invest directly, or in passives or largely in funds from their own group.

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A Spotlight On: UK Smaller Companies

A Spotlight On: UK Smaller Companies

At the end of June 2019, the IA UK Smaller Companies sector comprised of 52 funds with a combined level of assets totalling over £16bn. To meet the IA's sector requirements, funds must invest at least 80% of their assets in the bottom 10% of the UK equity market, by market capitalisation. Owing to the very nature of investing in smaller sized UK companies, funds within the sector tend to have a larger bias to domestic earnings and therefore the UK economy, versus those residing in the IA UK All Companies sector.

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A Spotlight On: IA Global Bonds

A Spotlight On: IA Global Bonds

At first sight the IA Global Bond sector can leave most potential investors feeling bewildered. The sector is made up of 180 funds investing in a variety of geographies across both companies and governments of varying credit quality. And that’s before consideration of the plethora of currency hedging options available.

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A Spotlight On: Property

A Spotlight On: Property

According to the Investment Association's (IA) latest data, the UK Direct Property sector has assets under management of £18.4 billion as at March 2019. The sector is home to those funds that invest predominantly in real estate located in the UK and to qualify, at least 70% of a fund must be invested in the asset class over rolling 5-year periods. The sector itself was launched in September 2018 to help improve the comparability of direct property funds.

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Latest Insights

A Spotlight On: IA Targeted Absolute Return

In the first quarter of 2020, broad measures of UK equity performance were down by about 25%. The manager of a UK equity fund which has that benchmark...

A Spotlight On: IA Europe

Despite significant uncertainties in terms of the outlook, for investors with a long-term horizon who are looking at European equities, such unprecedented...

ESG integration & Responsible investment

It is without question that 2019 was the coming of age for ESG and Responsible investment; new terms for many in the market, and ones that are having a...