Advisers focused on finding income-generating solutions for their clients in the first quarter of the year, new research has found.
Square Mile’s quarterly Market Intelligence Report reveals that advisers were increasingly researching funds with the potential to deliver income during Q1. Searches for income-related strategies accounted for 42.3% of all views, an increase of nearly five percentage points on Q4 2024, pushing capital accumulation to second place with a 38.5% share.
Searches for inflation protection continued to decline, making up only 3.8% of searches. Square Miles said this was “a clear indication that advisers no longer see inflation as a threat, despite fears of a potential resurgence following the introduction of trade tariffs”.
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Research into capital preservation also fell over the quarter to 15.4%, a drop of 3.4 percentage points on the previous quarter. This could suggest that advisers are taking a less bearish view of client asset allocation.
Equities were once again the most viewed asset class, with a broadly static share of 59.4% (58.1% in Q4 2024) while research into fixed income funds surged into second place accounting for 22.7% of views, up from 18.2% in Q4.
Multi-asset strategies were the third most popular at 17.8%, however alternatives and property as asset classes barely registered any adviser interest at 1.2% and 0.1% respectively.
Square Mile’s quarterly MI Report provides a detailed account of viewing patterns among advisers using the Academy of Funds, a depository of insight and opinion on all 394 active, passive and risk targeted funds and investment trusts rated by the company’s team of 20 analysts.
In 2024, the Academy received 86,881 visits, creating a strong indication of fund selector sentiment towards investment outcomes, funds and fund groups and asset classes.
Most-viewed funds, groups and sectors
The TwentyFour Sustainable Short Term Bond Income fund, which was introduced to the Square Mile Academy of Funds in March, was the most viewed responsible investment fund in Q1, accounting for 10% of all fund views. It was also the second most viewed fund overall, after the WS Havelock Global Select fund.
The WS Amati UK Listed Smaller Companies fund was the third most researched fund, suggesting that UK small-cap stocks might once again be a consideration for fund selectors, having been firmly out of favour for several years.
Indeed, with a 9.3% share, the IA UK All Companies was the second most viewed IA sector over the quarter, after IA Global at 15.7%. UK-focused fixed income strategies were also popular with the IA Sterling Strategic Bond sector coming in third place at 8.7%.
Among asset management groups, investment boutique Havelock was the most researched at 6.8%, with Schroders and Jupiter making up the remainder of the top three groups (4.6% and 3.9% respectively). Among firms offering risk-targeted solutions, Aviva Investors was in pole position, registering a 18.8% share, pushing Liontrust into second place with 14.1%. Two of Aviva’s risk-targeted funds, the Aviva Multi-asset Core III and Multi-asset Core I funds, occupied both first and second place as most popular strategies.
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Vanguard maintained its position as the most popular passive investment house, accounting for a third of all views (33.2%), followed by Legal & General Investment Management and BlackRock (22.8% and 12.5% respectively). However, the Fidelity US fund was the most researched passive strategy overall with a 3.6% share.
Scott Dakers, senior business development director at Square Mile, said: “After two years of delivering exceptional returns, US stocks finally fell in Q1, with declines seen in both tech and consumer discretionary sectors. Talk of trade tariffs started to emerge too, which also began to act as a drag on performance. However, US Treasuries outperformed due to the release of weaker economic data, such as a cut to economic growth and a rise in projected inflation.
“In contrast, European names started to outperform, in part due to defence and infrastructure spending plans announced by Germany but also due to inflows as investors rotated out of US names. Over the English Channel, larger UK equity names enjoyed a good quarter, but questions over the general health of the UK economy impacted the performance of small and mid-sized companies.
“Nonetheless, the fact that IA UK Companies was the second most research IA sector might suggest that advisers are reconsidering their exposure to the domestic market as the sheen wears off the US and the relative undervaluation of UK equities becomes increasingly apparent.”
This story was written by our sister title, Portfolio Adviser
