The professional investors using FE Analytics upped their research in defensive strategies such as cash funds and IA Volatility Managed portfolios during what turned out to be a turbulent October. 
Last month saw global markets hit with a significant sell-off as worries over a trade war between the US and China, concerns over global growth and rising bond yields spooked investors.
FE Analytics shows the impact that the sell-off has had on equities around the world, with emerging markets taking the brunt of the blow with an 6.83 per cent slump (in sterling terms) and the developed markets-focused MSCI World losing 5.44 per cent. The UK, US, European and Japanese indices all fell over the month.
Against this backdrop, the chart below shows the change in the sectors that the financial advisers, discretionary fund managers and other professional investors were researching on FE Analytics changed between October and the previous 12 months.
Source: FE Analytics Market Intel Tool
As can be seen, it’s the IA Unclassified sector that attracted the biggest upswing in research activity in October. Between October 2017 and September 2018, the peer group accounted for 7.13 per cent of all Investment Association research carried out on FE Analytics but this grew to 8.20 per cent last month.
Of course, the peer group is home to a diverse range of funds, including multi-asset strategies for various risk appetites, pure equity funds and target date retirement portfolios.
However, a look at the members of the IA Unclassified sector shows cautious funds witnessed large increases in FE Analytics research activity. SJP Gilts, SJP Money Market and Royal London Cash Plus were being more heavily researched last month, although it must be noted that riskier products like the newly-launched FP CRUX UK Special Situations, BlackRock ACS UK Equity Tracker and SJP Asia Pacific were also being looked at.
Evidence of a cautious mindset from professional investors can also been seen in the fact that IA Volatility Managed, IA Short Term Money Market and IA Money Market. The chart above makes clear, however, that research was still being carried out in some equity sectors, such as IA Global, IA Global Emerging Markets and IA Asia Pacific Excluding Japan – although some of this is likely to see how badly they were performing before the sell-off.
Turning to which individual funds were attracting more research on FE Analytics last month, we see the table is topped by Fundsmith Equity. The £16bn fund is headed up by FE Alpha Manager Terry Smith and is always one of the most heavily-viewed funds in an absolute sense but has continued to grow its share of total research by an impressive margin over recent months.
The five FE Crown-rated fund has one of the IA Global sector’s strongest track records thanks to Smith’s quality growth approach that minimises trading and only looks for stable, growing companies that can be held for a long time. It is currently top-decile over one, three and five years.
In second place is FE Alpha Manager Keith Ashworth-Lord’s £459.1m CFP SDL UK Buffettology fund, which resides in the IA UK All Companies sector and uses a process based on the approach taken by investing legend Warren Buffett.
Source: FE Analytics Market Intel Tool
The FE Invest team added the five FE Crown-rated fund to its Approved List earlier this week, citing its “outstanding” performance and active approach in building a concentrated portfolio of 25-35 stocks, with a bias to small- and medium-sized companies.
“We have been impressed by the disciplined approach taken by the investment team. Keith Ashworth-Lord has strong investment disciplines and will stick to them,” FE Invest’s analysts said.
“The patient, concentrated approach is one the managers share with some of the most successful of their peers in the UK and abroad, and could suit investors looking for a genuinely active fund that can outperform the UK market.”
Some of the funds being researched more in October were handling the sell-off relatively well. Of the 25 funds with the biggest uptick in research, eight were top quartile in their respective peer groups including Schroder Income, Newton Global Income and Baillie Gifford Strategic Bond.
Passive provider Vanguard also comes out well, with four of its five LifeStrategy funds benefitting from an increase in research on FE Analytics. In addition, Vanguard LifeStrategy 100% Equity, Vanguard LifeStrategy 60% Equity and Vanguard LifeStrategy 40% Equity were top-quartile over the month, but Vanguard LifeStrategy 80% Equity was in the third quartile.
Not all of the funds with an increase in research were performing as strongly in October as six – including Rathbone Global Opportunities, Baillie Gifford American (which had been experiencing a very strong 2018) and Fidelity Emerging Markets – were in the bottom quartile for the month.
Source: FE Analytics Market Intel Tool
The above table shows the funds that attracted a smaller share of Investment Association research in October when compared with the previous 12 months.
Once again, FE Alpha Manager Alexander Darwall’s £8.9bn Jupiter European fund has been hit with the biggest fall in research activity.
However – as in previous months – this is down to the fact that the fund captured an exceptional amount of research in 2017 and is now reverting to more ‘normal’ levels; Jupiter European remains one of the strongest IA Europe ex UK funds, sitting in the sector’s top three places over one, three, five and 10 years.