AJ Bell press comment – 15 April 2025
- AJ Bell made four changes to its Favourite Funds list in Q1 2025
- This included three funds being removed, with one addition
- Rationale behind the changes reflects wider efforts to maintain the highest conviction in the quality of the funds on the list
Paul Angell, head of investment research at AJ Bell, comments:
“Our Favourite Funds list is under constant review, and we consider thousands of different funds, their investment strategies, the fund managers and their teams when deciding what goes onto that list. Ultimately, our aim is to ensure we have the highest conviction in the funds that comprise the list so that it can better deliver for the myriad needs of the different types of investors that use it.
“We made four changes in the first quarter of this year in the form of three removals and one addition, which trims down our list a little. Here we explain the changes we made between January and March of this year.”
What did we remove, and what came in?
- Removed: Royal London Corporate Bond
“We decided to remove the Royal London Corporate Bond from our Favourite Funds list in January. Over recent years, the success of the fund’s team and their investment approach has led to significant inflows for their investment strategies from both institutional and retail investors. The team are now one of, if not the, largest active fund manager investing in the sterling corporate bond market.
“This increase in assets under management means that the team need to buy a higher proportion of the overall sterling corporate bond market and have therefore become larger owners of their favoured bonds.
“As an investment strategy gets larger, it usually becomes harder to buy and sell certain assets. Known as liquidity risk, this problem can become more pronounced in stressed market conditions, or if a fund is experiencing large outflows. So far, Royal London have managed the liquidity of this fund very effectively. This is thanks to their diversified underlying holdings, loyal investor base, and ability to internally cross trades where appropriate to best execution.
“However, despite this effective liquidity management, and the impressive returns generated in the fund, our preference is for funds that are part of a smaller overall investment franchise. We believe such funds can be nimbler with their positioning, giving them a greater chance to both capture opportunities and avoid risks in various market environments.”
- Removed: Schroder European
“In Europe, we decided to remove the Schroder European fund from our Favourite Funds list in March as we’ve grown less confident in the fund’s manager and investment approach.
“The aim of manager, Martin Skanberg, is to create a balanced portfolio of growth, value, cyclical and defensive stocks. This is something he constantly reassesses to make sure the fund is invested in the areas of the market where he sees the best opportunities. Despite this noble aim, the fund’s performance has underwhelmed over the medium to longer term, delivering returns below its index and peers.”
- Added: Schroder Asian Alpha Plus
“Also in March, in Asia we chose to add the Schroder Asian Alpha Plus fund because of its strong management team, deep pool of research analysts, and considered investment approach.
“At the fund’s helm is Richard Sennitt, who has been lead manager since 2021, taking over from long-time manager Matthew Dobbs. Richard started his investment career at Schroders over three decades ago, initially working as an analyst before forming a partnership with Matthew Dobbs that spanned 15 years until Matthew’s retirement. Richard is joined by co-portfolio manager Abbas Barkhordar. The pair work with a large group of on-the-ground analysts who cover the breadth of the Asian equity market and look to identify companies with growing earnings, stable balance sheets and, most importantly, strong management teams.
“The portfolio incorporates the best ideas of this analyst team, focusing on companies earning above their cost of capital (the expense incurred to fund operations and investments). Typically, the portfolio is made up of 55 to 60 stocks and can substantially differ from the sector and country weightings of the benchmark.”
- Removed: Fidelity Asia
“To make room for the Schroder Asian Alpha Plus fund, we decided to remove the Fidelity Asia fund.
“While Fidelity Asia’s lead manager, Teera Chanpongsang, has shown himself a capable investor and the fund has a comparably deep pool of analysts, it has a similar investment philosophy to the Schroder Asian Alpha Plus fund. We believe investors are better served by the approach of the Schroders team, which typically results in a more balanced portfolio that is less volatile when their investment style is out of favour.”
AJ Bell Favourite Funds explained:
AJ Bell’s Favourite Funds is a list of funds across different sectors and risk appetites that have been extensively researched and selected by our in-house investments team, designed to help investors with their own investment research. The list is chosen by our investment specialists, is regularly updated, and features only funds that we believe offer a combination of a clear and robust investment philosophy and process, a proven management track record and value for investors.