Advisers cut property exposure on liquidity fears - FE data

The index, which is rebalanced twice a year, shows six adviser groups have removed IA UK Direct Property funds from their portfolios for investors across all risk profiles.

Ten funds in the sector were removed overall - the highest number from just one sector - with Threadneedle's UK Property Authorised Investment, L&G's Property Feeder and M&G's Property Portfolio funds among those to be discarded.

The research attributes this to the high-profile suspensions of the M&G and Prudential UK Property funds in 2019, which remain suspended.

Oliver Clarke-Williams, portfolio manager at FE Investments, said: "The suspension of M&G and Prudential underlines the issue of liquidity in the sector and with the FCA looking at the nature of open-ended funds and investor redemptions more broadly, some wealth managers have evidently seen more trouble ahead for the sector." 

Absolute return

Elsewhere, the index also showed a fall in the popularity of targeted absolute return strategies, with wealth managers removing six funds from the IA Targeted Absolute Return sector from their portfolios. Jupiter's Absolute Return, LF Odey's Absolute Return and Premier's Defensive Growth funds were among those to lose their place in the index.

However, the UK overall has remained a key area of focus for wealth managers, with the IA UK All Companies, IA Equity Income and IA UK Smaller Companies sectors all seeing increased exposure.

From these three sectors, 18, nine and six funds respectively have been added to the index. These include JPM's UK Equity Core, Jupiter's UK Special Situations and Threadneedle's UK Mid 250.

Equities overall are in favour with wealth managers. As a result, the IA Europe Excluding UK and the IA Global sectors have also seen increased exposure, with 16 and 11 funds added respectively.

Clarke-Williams added: "Equities have been an interesting story throughout 2019. Our panelists' weighting in the asset class is largely a reflection of the impact of continuing low interest rates, which looks set to extend well into 2020.

"In terms of the UK, equities here have persistently lagged global markets and are sitting on fairly low valuations at the moment. The increased weighting in the index suggests that many wealth managers are hoping that now the uncertainty around Brexit appears to have diminished somewhat, UK equities will re-rate in line with other developed markets.

She concluded: "Overall, while last year was undoubtedly a tough year for some sectors, wealth managers largely saw 2019 as one of opportunity and this is reflected by the fact that we saw 137 funds added to the AFI, with just 57 removed in return."

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