The need to protect clients against the impact of inflation is slowly fading away, according to Square Mile’s quarterly market intelligence report.
In Q1 2022, 17.4% of advisers were looking at investment solutions centred on inflation protection, but that has dropped to 14% in Q2.
Capital accumulation as an investment outcome rose in the second quarter to 46.5% from 44.9%.
Among advisers visiting Square Mile’s depository of insight on its 337 rated funds, the M&G Floating Rate High Yield strategy was the most popular among actively managed funds, followed by the Axa Global Short Duration Bonds fund.
The research firm said this suggests financial advisers are “increasingly researching strategies with the potential to protect client assets in an environment of tightening interest rates”.
For those with a responsible investment focus, the Royal London Sustainable World Trust was the most popular, although the Wellington Global Impact Bond fund started receiving more interest – up 5.2 percentage points since Q1 – putting it in second position at 9.1%.
In terms of overall fund groups, Jupiter, Schroders and Axa IM remained the three most viewed firms, registering 8.1%, 6.6% and 5.9% of all views, respectively.
Fighting uncertainty
When looking at sectors, Square Mile found that the situation remained static in the second quarter with the IA UK All Companies (13%), IA Sterling Strategic Bond (11.2%) and IA UK Equity Income (7.3%) maintaining the top spots.
On an asset class level, equities were once again the most looked for. Searches for fixed income, however, increased by 3.8 percentage points to 27.5%, reversing the trend seen in previous quarters.
But Square Mile revealed that, in the past three months, financial advisers have been focusing significantly more on obtaining greater insights on investment processes by paying greater attention to fund performance.
This trend saw ESG– which was the most viewed in the firm’s fund dashboard – drop t0 26% from 42.6%, while views on performance doubled to 20%.
Jock Glover, strategic relationships director at Square Mile, said: “There was little let up to the challenges that have presented headwinds to markets over previous quarters. Inflation continued to march upwards, hitting bond prices and driving up yields, while the shadow of a potentially recessionary environment led to a sell-off in equities globally.
“The UK, however, was bolstered by its heavy weighting to the energy companies, whose valuations have been increased by the war in Ukraine, and multinational firms which have benefitted from a weakened sterling.
“The central purpose of the Square Mile Academy of Funds is to inform advisers as they research solutions to meet clients’ expected investment outcomes.
“The fact that the opinion pillar of the Fund Dashboard was so widely visited suggests that, now more than ever, fund selectors are seeking independent and informed analysis of investment strategies either to validate their selections or to research new options suitable for this period of ongoing market uncertainty.”
