UK financial advisers significantly reduced their equity holdings across a range of model portfolio types in the first quarter (Q1) of this year, according to Natixis Global Asset Management’s latest UK Portfolio Barometer.
The majority of this reduction came out of UK equity funds, and the firm says this may have been the result of a tactical shift ahead of the UK general election in May, or a wider strategic shift to de-risk portfolios after five years of strong equity returns.
The analysis found that alternatives and global equity funds were the main beneficiaries of the UK equity reductions.
In the fixed income space, advisers preferred corporate to government bonds due to on-going duration risk fears and a continuing search for yield.
Commenting on the research, James Beaumont, head of the portfolio research & consulting group at Natixis, says very high correlations were found between funds in the mainstream fixed income sectors, which could make portfolios more susceptible to losses in negative market conditions.
“This means advisers may have to look beyond the mainstream for sources of diversification within fixed income, such as emerging market or long/short debt funds,” he says.
Overall, 147 model risk-rated portfolios were analysed across 38 firms in the UK between the months of January and March this year. The model portfolios under review were grouped into three risk-rated categories: ‘conservative’, ‘moderate’, and ‘aggressive’, based on definitions given by the independent financial advice firms themselves.
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