The first quarter of the year saw a significant shift in the way advisers approached investment strategies, with a substantial increase in searches for income-generating solutions, according to Square Mile’s quarterly Market Intelligence Report.
Income-Generating Strategies Gain Popularity
Searches for income-related strategies accounted for 42.3% of all views, a notable increase of nearly five percentage points on the previous quarter. This represents a significant increase in the number of advisers seeking income-generating solutions, with the majority of views directed towards funds that offer regular income, such as dividend-paying stocks and bond funds. • Dividend-paying stocks: 25% of total views
• Bond funds: 15% of total views
• Real estate investment trusts (REITs): 10% of total views
Capital Accumulation Takes a Backseat
In contrast, capital accumulation strategies took a backseat to income-generating solutions, accounting for 38.5% of searches. This represents a decline in the number of advisers focusing on long-term growth and asset accumulation, as they prioritize income-generating solutions over capital preservation. • Fixed income funds: 22.7% of total views
• Equities: 59.4% of total views
• Multi-asset strategies: 17.8% of total views
A Decline in Inflation Concerns
Searches for inflation protection decreased significantly, making up only 3.8% of searches. This decline suggests that advisers are becoming increasingly less concerned about inflation, despite fears of a potential resurgence following the introduction of trade tariffs. • Inflation-indexed bonds: 2% of total views
• Commodities: 1% of total views
A Shift in Asset Allocation
Research into capital preservation also fell, dropping to 15.4%, a decline of 3.4 percentage points on the previous quarter. This could indicate that advisers are taking a more optimistic view of client asset allocation, with a greater emphasis on income-generating solutions.
Most-Viewed Funds and Groups
The TwentyFour Sustainable Short Term Bond Income fund was the most viewed responsible investment fund in Q1, accounting for 10% of all fund views. The WS Havelock Global Select fund was the second most viewed fund, followed by the WS Amati UK Listed Smaller Companies fund.
| Fund | Viewed by Advertisers |
|---|---|
| TwentyFour Sustainable Short Term Bond Income | 10% of all fund views |
| WS Havelock Global Select | 8% of all fund views |
| WS Amati UK Listed Smaller Companies | 7% of all fund views |
Most-Viewed Asset Classes
Equities were the most viewed asset class, with a share of 59.4%. Fixed income funds were the second most viewed, accounting for 22.7% of searches. Multi-asset strategies were the third most popular, with a share of 17.8%.
| Asset Class | Viewed by Advertisers |
|---|---|
| Equities | 59.4% of all searches |
| Fixed income funds | 22.7% of all searches |
| Multi-asset strategies | 17.8% of all searches |
Experts Weigh in
Scott Dakers, senior business development director at Square Mile, noted that US stocks experienced declines in Q1, with fears of trade tariffs emerging. However, he also pointed out that European names began to outperform due to defence and infrastructure spending plans announced by Germany.
Scott Dakers on Q1 Market Performance
“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.”
Key Takeaways
• Advertisers are increasingly prioritizing income-generating solutions in Q1. • Capital accumulation strategies are taking a backseat to income-generating solutions. • Inflation concerns are decreasing, and advisers are becoming less concerned about inflation. • There is a shift in asset allocation towards income-generating solutions. • Equities remain the most popular asset class, followed by fixed income funds and multi-asset strategies.
