IFAs shifted away from UK asset exposure towards global markets in 2019 amid domestic political uncertainty and strong global market momentum, Natixis Investment Managers has found.
Natixis' 2019 portfolio barometer, which analysed more than 50 UK model portfolios, found that advisers surveyed transferred almost 16% of their local allocations to global markets.
The investment analysis group saw this as a move to "diversify and hedge against ongoing macro-economic investment risks linked to Brexit and geopolitical uncertainty".
The analysis also showed a shift from global equities in favour of fixed income and alternative assets, as IFAs flocked to safer havens for risk-averse investors.
Natixis international head of multi-asset portfolio management James Beaumont said: "Following a challenging end of 2018 for equities, IFAs materially decreased their allocation to equities in 2019, and even started to become more conservative in their domestic allocation. The Brexit process, leadership contest and general election shaped the political and economic landscape over the year and outflows from GBP denominated assets show UK investors were feeling the heat of the continued uncertain investment outlook."
He added: "Despite a more globalised approach to asset allocation, our research has revealed that IFAs missed out on rallying global equity markets last year as they opted for safe havens. Despite Central Banks keeping a firm grip on interest rates, fixed income benefitted from these portfolio shifts, particularly investment-grade corporate credit."
2020 and coronavirus
Beaumont said after the UK general election and more political certainty, advisers started to move back to UK-denominated stocks, with the direction of UK equity flows changing from November 2019 onwards.
However, coronavirus has knocked the positive momentum out of global markets with corporate earnings, bond yields and global economic growth taking a hit.
"The dramatic volatility at the end of February and beginning of March has caused clients to completely re-evaluate their portfolios to adequately shelter themselves from downside risk," Beaumont said.
He continued: "Market uncertainty is far from over and may even intensify over the coming months as the virus spreads. As ever, we urge investors to maintain calm in periods of market volatility and remember the virtues of a more long-term investment approach with a diversified portfolio."
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