Monday Club – 19/10/26: Your weekly Wealthwise digest

Investment round-up

FCA targets MPS for CCI disclosure regime

The Financial Conduct Authority is examining whether to bring model portfolios under its incoming consumer composite investments (CCI) regime, which aims to standardise disclosure requirements across all types of authorised funds. The regulator said it had asked firms “whether we should make the regulatory treatment of MPS more consistent with other managed products”.

Managers top up on fixed income – BoA survey

Fund managers have become increasingly positive on the prospects for fixed income, with bonds seeing the largest increase in allocations among major asset classes and sectors in the latest Bank of America global fund manager survey. The research indicated investors have rotated allocations away from banks, US stocks and consumer discretionary into bonds, as well as Japanese and UK stocks and utilities.

Wealthy investors sell assets ahead of Budget

More than a third of wealthy investors have either sold investments or plan to do so ahead of the Budget amid concerns that capital gains tax (CGT) rates could rise, according to research from Wealth Club. The group surveyed 506 clients with an average estimated wealth of £3.15m.

M&G launches private credit LTAF

M&G has launched a £74m private credit long term asset fund (LTAF). The M&G Diversified Private Credit Feeder LTAF aims to provide access to private credit investments across the UK and Europe, including infrastructure, real estate and other assets. It has backing from M&G’s £138bn With-Profits Fund.

Aberdeen asset allocation responds to higher rates

Aberdeen has reined in its convictions on property, government bonds and the US dollar for the next 12 to 18 months, in response to higher interest rates. In the near term, the fund house has projected precautionary “insurance hikes” from the Federal Reserve, Bank of England, European Central Bank and Bank of Japan, rather than the start of a sustained tightening cycle.

Active ETF launch from Franklin Templeton

Franklin Templeton has launched Putnam Investments’ first actively managed ETF in the UK. The Franklin Putnam Focused US Research UCITS ETF, which began trading on the London Stock Exchange on 15 October, provides investors with access to a concentrated portfolio of 30 to 45 US equities selected using Putnam’s fundamental research process.

Sycomore launches European fund

Sycomore Asset Management, part of Generali Investments, has launched a European Strategic Sovereignty fund. The fund, which will invest in listed European companies central to the continent’s economic resilience and industrial autonomy, is classified under Article 8 of the EU Sustainable Finance Disclosure Regulation framework.

Global X launches mining company ETF

Global X has unveiled an ETF targeting global goldmining companies with ‘responsible’ characteristics. The Global X Responsible Gold Miners Ucits ETF has a total expense ratio of 0.55% and is listed on Deutsche Boerse and the London Stock Exchange. It is classified as an Article 8 fund under the EU Sustainable Finance Disclosure Regulation framework.

European ETFs see €37bn of inflows in September

European ETFs and ETCs recorded €37.1bn (£31.1bn) in flows in September, taking the year-to-date total to €355.5bn – more than that for all of 2025, according to the latest data from Morningstar. Equity ETFs attracted €25.5bn, down from €37.5bn in August.

In focus: Why buy bonds?

The pressure on government bonds finally eased last week, as investors grew nervous about the AI trade and retreated to perceived safer havens. This was a cheering moment for multi-asset managers – confirming the normal rules of bond-market investing apparently still apply – while it may also serve to reassure those clients who had started to lose faith in fixed-income allocations in general.

Antony Webb, head of MPS Investment Funds at Quilter Cheviot, says clients are increasingly asking why the team still invest in bonds. Memories of 2022, when the asset class did little to protect investors against volatility in the equity market, remain relatively fresh while 2026 is currently shaping up to be another negative year.

Over the year to date, the average funds in the IA Gilt and IA Global Government Bond sectors are down by 2% and 1.4% respectively. As things stand, then, most investors are still underwater on their bond holdings over five years – by 7% for global bond funds and 23.9% for gilt funds.

At the same time, higher interest rates have left cash rates relatively high – prompting investors to question whether it is worth taking the additional risk on bond markets for an extra percentage or two, when investors can pick up almost 5% from, say, Fidelity Cash. Capital returns may have been unexciting, but that fund has risen 18.6% over five years and experienced no drawdowns.

Rising enthusiasm

It certainly makes bond funds a hard sell at present. Clients might reasonably ask why wealth managers are including an asset class that purports to lower their risk but, in recent years, has done nothing but lower their returns.

In turn, wealth managers should encourage them to look forward rather than back – investors now have a new fixed income reality. Bond fund managers – usually a gloomy bunch – are positively giddy with the opportunities on offer.

The October edition of Bank of America’s global fund manager survey found professional investors rotating allocations away from banks, US stocks and consumer discretionary – and into bonds. Indeed, the research showed allocations rising by more than 10 percentage points over the month. This came as the proportion of respondents forecasting a rate hike in the coming 12 months fell steeply to its lowest level since May 2025.

“Think about a gilt yield, for example, at 5.4% – or a US 10-year yield currently in excess of 5% – while corporate bonds are even higher,” says Guinness Global Strategic Bond fund manager Craig Veysey.

“If you look at a 6% starting yield, and compound that up over the next five years, that is going to give you a compounded return – purely from income – of 34%. That in itself provides a very solid base of total return for investors, without thinking about the extra alpha you could add from credit selection or from managing the macro-overlay side of the portfolio.”

For his part, Webb argues bonds have the advantage of “certainty in an uncertain world”, adding: “Who is actually using agentic AI in full in their day-to-day personal or business lives? The integration of AI is unknown. What you do know, however, is that you can buy a 30-year bond in the UK for 6% a year. Where have you ever had that? Looking through the exam textbooks, they will say that the long-term run on equities is only around 7% or thereabouts. That is why bond managers are excited.”

Inflation protection?

One of the strongest criticism of bonds these days is they do not provide protection against inflation at a time when such pressures appear to be mounting. Bond fund managers, however, now argue they really could provide more inflationary protection from here.

“A recurring fear in markets is that bonds offer little protection against inflation – and, four years ago, that was a fair charge,” says David Roberts, head of fixed income at Nedgroup Investments, for example. “In March 2022, US core inflation was running at 6.5% while the 10-year Treasury yielded 2.3%.

“As such, lending to the US government for a decade meant locking in a real loss of more than four percentage points a year – and bondholders paid dearly once yields caught up. Today, the reverse is true. At the end of September, 10-year yields stood at 5.3% – more than double core inflation of 2.6%.”

Roberts notes the bond market is already expecting inflation and further rate hikes, adding: “Last week’s 10-year auction – the highest-yielding since November 2000 – drew strong demand, with indirect bidders taking more than 80% of the sale. Unless inflation accelerates from here, bonds look very cheap in real terms.”

One significant exception here may be the corporate bond sector, where spreads are very tight and there is a danger these widen out if growth slows or a risk of recession is priced in. Nevertheless, government bonds have shown their mettle in the latest bout of weakness, rallying in the face of an AI sell-off.

A traditional argument for bonds has been their role as a diversifier yet, in recent times, as inflationary pressures have escalated, bonds have not provided a reliable counterbalance to equity market volatility. Their performance over the past week, however, has suggested they could still have a part to play here.

“The CoreWeave episode shows how quickly sentiment towards AI can turn,” Roberts observes. “If it does fade, the inflationary impulse it has generated could fade with it.” He adds that US consumers are drawing down against buoyant stock portfolios, which means spending is, to some extent, reliant on the continuation of the AI trade. “The past week has shown its fragility,” Roberts concludes. “Bonds offer some protection.”

A final consideration for investors is that cash has no capital-return potential – at these levels, bonds do. With cash, if interest rates fall, investors just receive a lower return. With bonds, that actually serves to push up their prices. After several years during which it has been difficult to find a reason to hold bonds, there increasingly appears a more compelling narrative for their inclusion in portfolios.