Following the high-profile suspensions of the M&G and Prudential UK property funds last year, UK wealth managers have significantly reduced their exposure to property.
Six adviser groups have removed direct property funds from their portfolios for investors across all risk profiles, according to FE fundinfo’s Adviser Fund Index.
Ten funds in the sector were removed overall, the highest from one sector single in the index, with Threadneedle’s UK Property Authorised Investment IGA, L&G’s Property Feeder and M&G’s Property Portfolio funds among them.
Earlier this week M&G announced that it was continuing the suspension of its £2.5bn property fund despite making good progress in selling some of the fund’s assets.
M&G suspended trading in its flagship property fund in December after investors rushed to withdraw their money, which the asset manager blamed on Brexit-related political uncertainty.
“The suspension of M&G and Prudential underlines the issue of liquidity in the sector and with the FCA looking at the nature of open-ended funds and investor redemptions more broadly, some wealth managers have evidently seen more trouble ahead for the sector,” said Oliver Clarke-Williams, portfolio manager at FE Investments.
Elsewhere the decline in popularity of targeted absolute return as an investment strategy was born out in the index, with wealth managers removing six funds. Across the industry absolute return funds have continued to struggle, with Jupiter’s Absolute Return and Premier’s Defensive Growth funds both losing a place in the index.
The continued strength of equities as an asset class both in the UK and abroad underpinned much of wealth managers’ thinking in the AFI rebalance. Both Europe (excluding the UK) and global sectors saw their exposure being upped, with 16 and 11 funds added respectively.
Clarke-Williams said: “Equities have been an interesting story throughout 2019. Our panelists’ weighing in the asset class is largely a reflection of the impact of continuing low interest rates, which looks set to extend well into 2020.”
“In terms of the UK, equities here have persistently lagged global markets and are sitting on fairly low valuations at the moment. The increased weighting in the index suggests that many wealth managers are hoping that now the uncertainty around Brexit appears to have diminished somewhat, UK equities will rerate in line with other developed markets.”