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The six most popular funds in DFM model portfolios
We looked at the breakdown of medium risk models run by Close, Quilter, Brewin Dolphin, Investec Wealth & Investment – alongside Bestinvest’s Income and Growth portfolio and Deutsche’s Diversified Core portfolio to see which funds appear the most across portfolios.
Industry professionals are warning that the impact of the retail distribution review (RDR), suitability and consolidation are causing discretionary managers to buy the same funds.
Pointing to the growth of adviser outsourcing and model portfolio services, JOHCM UK Equity Income manager Clive Beagles was the latest to publicly express his concerns that the RDR will cause large funds to dominate their sectors even more.
He attributes this to increased commonality between model portfolios run by wealth managers and IFAs due to more stringent due diligence processes – as firms feel the effects of increased regulatory scrutiny. ‘The largest four to five funds have dominated each individual sub-sector and the RDR accelerates that,’ he said.
We took a look at the model portfolios run by six leading wealth management groups to see where the greatest crossover lay. Overall we found 16 funds that overlapped between at least two to three of the models. Here are the six most widely held funds.
Invesco Perpetual Income, Neil Woodford
Renowned UK equity income manager Neil Woodford’s Invesco Perpetual Income fund featured across the model portfolios, representing 13.76% of Quilter’s balanced model, 4.3% of Close Brothers Asset Management’s model, whilst also appearing in Investec Wealth & Investment’s balanced model.
Threadneedle UK Equity Income, Leigh Harrison and Richard Colwell
Citywire AA-rated Richard Colwell and A-rated Leigh Harrison’s Threadneedle UK Equity Income fund also spanned the model portfolios of Brewin Dolphin, Bestinvest and Investec. It formed 6.5% of Brewin’s balanced model at the end of October and 5% of Bestinvest’s model.
SLI Global Absolute Return Strategies (GARS), Euan Munro
The £19 billion fund featured in the model portfolios of three of the wealth management companies, with identical 2% allocations across models run by Brewin Dolphin, Bestinvest and Quilter.
M&G Optimal Income, Richard Woolnough
The £10.3 billion fund represents 5% of Bestinvest’s Income and Growth model, 3.5% of Close’s balanced model and 4% of Deutsche’s Diversified Core portfolio.
Artemis Income, Adrian Frost
Income Stalwart Adrian Frost’s Artemis Income also featured heavily across the model portfolios of Brewin, Investec Wealth & Investment and Bestinvest. Brewin Dolphin is allocating 6.5% of the model to the fund, while Bestinvest allocated 5% to Frost’s portfolio.
Fidelity Strategic Bond fund – Ian Spreadbury
The £1.3 billion fund represents the only bond fund to appear among the list of six funds which represent the biggest areas of crossover. The fund appears in the models of Bestinvest, Close Brothers Asset Management and Investec Wealth & Investment.