Multi-Asset sector tops adviser purchases of investment companies in Q3

by | Nov 14, 2022

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For the second quarter running, the Flexible Investment sector was the most purchased investment company sector on adviser platforms, and also the most popular by net demand, according to data from ISS Financial Clarity compiled for the Association of Investment Companies (AIC).

Flexible Investment accounted for 18% of purchases in the third quarter of 2022, widening the gap with the second-placed Global sector, which represented 10% of purchases. In the second quarter, the two sectors’ shares were 17% and 13% respectively (see table 1).

Before Q2 this year, the Global sector had been the most purchased sector for the previous 20 quarters (five years).

Table 1: Most popular sectors by purchases

Rank in Q3AIC sector% of purchases
(Q3 2022)
% of purchases (Q2 2022)
1Flexible Investment18%17%
2Global10%13%
3Infrastructure10%5%
4UK Smaller Companies8%7%
5Property – UK Commercial7%6%

Source: AIC/ISS Financial Clarity

The Flexible Investment sector includes “capital preservation” investment companies such as Capital GearingPersonal Assets and Ruffer Investment Company, as well as RIT Capital Partners, which has a close association with the Rothschild family, and Caledonia, which invests in both public and private markets and whose largest holding is Seven Investment Management.

As well as attracting the most purchases, the Flexible Investment sector was also most popular by net demand (purchases minus sales) on adviser platforms (see table 2).

Table 2: Most popular sectors by net demand

Rank in Q3AIC sectorRank in Q2
1Flexible Investment1
2Infrastructure5
3UK Smaller Companies2
4Renewable Energy Infrastructure4
5Private Equity14

Source: AIC/ISS Financial Clarity

The Private Equity sector jumped in popularity in Q3, from 14th place to fifth by net demand, suggesting bargain hunters may have been active in the market. Investment companies in the sector traded at an average discount of 33% during the quarter.

Investment company purchases up 20% year-on-year

Purchases of investment companies on adviser platforms totalled £334m in the third quarter of the year, down 7% on the previous quarter (Q2: £361m) but up 20% compared to the same quarter of 2021 (Q3 2021: £279m).

This was in contrast to the broader trend in purchases of all products on adviser platforms which fell 9% year-on-year, from £46.04bn in the third quarter of 2021 to £41.68bn in the most recent quarter.

Nick Britton, Head of Intermediary Communications at the Association of Investment Companies (AIC), said: “In times of trouble, financial advisers and wealth managers are turning to flexible friends – those investment companies with the mandate to invest in a mix of different assets. This has driven relatively resilient demand for investment companies in the third quarter of the year, in contrast to the broader decline in platform purchases overall.

“However, there are also signs of bargain-hunting in deeply discounted sectors such as property, private equity and smaller companies, which are perceived by some as offering value. The Technology and Media sector ranked seventh by net demand in the quarter, its highest ranking since the early days of the Covid pandemic.”

There were 2,094 firms buying investment companies in the third quarter of 2022, including 1,936 financial advice firms and 45 wealth managers. This was the highest total figure since Q3 2021.

The bulk of these purchases came through the Transact platform, which accounted for 58% of the purchases tracked by ISS Financial Clarity. Other adviser platforms taking a share of investment company purchases included 7IM (11%), Ascentric (11%) and FundsNetwork (9%).

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