Square Mile: Advisers eye income funds over capital accumulation

Legal & General most searched passives provider, according to fund research firm’s market intelligence report for Q3


Advisers have switched their focus from capital accumulation in favour of income funds, according to Square Mile’s latest Market Intelligence report.

Searches for income strategies on Square Mile’s Academy of Funds dashboard totalled 46.7% of searches in the three months to 30 September, up from 35.8% in the prior quarter.

Meanwhile, research on capital accumulation funds dropped to 33.3% from 50.9%.

Capital preservation and inflation protection funds also saw increased interest, to 13.3% and 6.7% respectively.

See also: Schroders rolls out alternatives fund to MPS clients

Scott Dakers, business development director at Square Mile, said: “Our quarterly MI Reports over the first half of 2023 suggested that advisers were focusing on investment strategies with the potential of achieving capital accumulation. 

“This trend saw a major reversal in Q3, with attention now fixed on funds that seek to deliver income as an investment outcome. This coincides with a period where returns available on cash have reached compelling levels after 14 consecutive increases in the Bank of England base rate. 

“Alongside a notable rise in the use of ‘Risks’ as a starting point for research via our Fund Dashboard as well as significant interest in ‘Performance’, this might suggest that advisers are looking for income solutions that can outstrip the risk-free levels offered by cash.  It might also highlight a more risk averse mindset.”

Liontrust top for risk targeted returns

Among fund groups, Liontrust maintained its position as favourite for risk-targeted return solutions with 24.4% of all searches, while Legal & General accounted for 14.4%.

For passive funds, L&G overtook Vanguard with 21.1% of searches, compared to the latter’s 15.2% share.

Meanwhile, equities continued to dominate adviser interest by asset class, with 52.8% of all look ups. Fixed income accounted for 25.9% of all searches, while multi asset made up 19.8%.

Advisers showed little interest in alternatives and property funds over the quarter, mustering just 1.2% and 0.2% respectively.

Dakers added: “Economic growth has been largely positive to date this year and the trajectory of inflation is looking more promising, perhaps signalling the end of the cycle of tightening monetary policy.  Nonetheless, many unknowns remain. 

“The full impact of higher interest rates may not have been fully felt and recession remains a real possibility; the US is bracing itself for Presidential elections in 2024; and geo-politics remain tense, with Chinese sabre-rattling in the South China Sea and no end in sight to the war in Ukraine.

“It is understandable, therefore, that risk is front of mind when researching funds. Square Mile is dedicated to helping advisers make informed investment decisions on behalf of their clients and our Academy of Funds houses compelling strategies which, when combined within a diversified portfolio, have the potential of meeting a range of investment objectives across differing market environments.”

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