One quarter (23 per cent) of wealth managers and IFAs claim their clients are keen to de-risk their investment portfolios, according to new adviser research conducted by TIME Investments, an income fund and estate planning specialist.
A further 26 per cent said that they are very nervous of investing in equities.
Over half (53 per cent) of advisers said that the number of investment clients looking to de-risk is greater than the same time last year, with 75 per cent citing concerns over the Brexit outcome as the main driver when asked to rank several different factors. This was followed by stock market volatility (48 per cent), the global economic outlook (35 per cent), concerns over the geopolitical outlook (26 per cent), real fear of financial loss (26 per cent), concern over rising interest rates (12 per cent) and concerns over rising inflation (6 per cent).
Clearly with more clients looking to move away from riskier investments, advisers are recommending moves into lower risk, less volatile investments.
For those clients looking to de-risk their portfolios, the research reveals that 42 per cent of advisers are recommending cash, followed by long income property (26 per cent), alternative investments (25 per cent), bonds (25 per cent), real assets (23 per cent) and structured products (22 per cent). Just 2 per cent said they would recommend hedge funds.
When asked to rank the most important features of the above investments, low correlation was cited by 38 per cent of advisers, followed by defensive income strategies (26 per cent), secure income streams (16 per cent), investing for growth (12 per cent), IHT mitigation (10 per cent) and inflation-linked returns (2 per cent).
Thomas Watts at Cumberland Place supported the results of this adviser research, adding “With the current economic climate being what it is, it is important we make assurances that our clients’ investments are mitigated against unnecessary risk. As such, we are increasingly recommending defensive investments to form a core part of our clients’ portfolios.”
Henny Dovland of TIME Investments says: “Our research highlights how the combination of economic and political uncertainty is having a profound effect on investors’ attitudes to risk. They are moving to investments which have low correlation and provide a greater level of certainty in terms of delivering secure income streams.”
Last year, TIME launched its TIME:Defensive Income Securities fund in response to demand from advisers and their clients for an alternative, liquid, equities-based income fund with lower volatility and more predictable income than traditional equity income funds.
The GBP31million open ended fund targets an annual income return of at least 5 per cent and capital growth over the long-term from a portfolio of high quality, lower volatility investments in infrastructure, renewable energy companies, listed real estate and selected corporate bonds of asset backed companies.
The fund uses a quant driven investment strategy based on a sophisticated stock selection process which involves the use of various rigorous screening criteria. Based on these filters, a balanced portfolio of income-producing securities is acquired on a “buy and hold” basis.
To be included in the portfolio, equity holdings need to have demonstrated a lower level of volatility than the market average and to have delivered consistent and predictable dividend yields. Infrastructure and renewable energy stocks will provide inflation linked cash distributions. Where the fund invests in Real Estate Investment Trusts (REITs), these must have a low level of gearing.
The investment strategy seeks to remove the subjectivity of decision-making and emotional bias which can affect the investment decisions made by active managers. The result is a fund which aims to deliver a consistent, secure income and lower volatility for investors.