The changes we've made to the AJ Bell funds

James Flintoft

Archived article

Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

The AJ Bell funds are managed by the team at AJ Bell Investments, with one aim: helping you invest. We look after the funds and make the daily decisions to keep your money working hard for you.

That means, from time to time, we’ll make updates to the funds in response to differing market conditions. In this article, we’ll take you through the recent changes we’ve made to the asset allocation of the AJ Bell funds.

How does the investment team approach changes to asset allocations?

We follow a structured approach to managing asset allocations. First, we conduct an annual review of our process and constraints to ensure it includes assets that align with our long-term strategic objectives. This sets the foundation for our strategic asset allocation, which we optimise every year. Then throughout the year, we can make tactical adjustments to the portfolios, as markets evolve and move.

What structural changes have you made this year?

This year, we implemented two significant structural changes. The first involved removing alternatives, specifically infrastructure and property, from the asset allocation process. These asset classes no longer provide the return dynamics or diversification we seek over the long term. While they remain part of the universe of assets that we consider, we now view them more like equity asset classes.

The second change focuses on emerging markets and Asia, particularly China. Historically, China was embedded within broader emerging markets and Asia-Pacific indices. However, to improve transparency and flexibility, we’ve separated China into its own category, distinct from emerging markets ex-China and a developed Asia-Pacific index. This adjustment enables us to manage China-specific risks more precisely.

What are the major themes in the revised asset allocation this January?

Inflation is the central theme shaping our asset allocation this year, particularly its impact on portfolios. In the UK, we’re especially mindful of vulnerabilities related to food and energy inflation, given the country’s dependence on imports. Over the past year, inflation risks have been somewhat overlooked due to political and geopolitical distractions, but we believe there’s potential that markets are underestimating these risks.

In response, we’ve made significant changes to our bond portfolio. Specifically, we’ve adjusted our bond  holdings to minimise interest rate risk, ensuring that the portfolios are less exposed if interest rates did rise again on the back of higher inflation.

How has equity content changed in the funds?

We’ve adjusted how we manage equity content by treating it as a standalone portfolio within each allocation. This allows us to evaluate its risk more precisely against the global equity index. This year, we’ve increased exposure to Europe, where valuations are particularly attractive, and made changes to our US allocation to reduce risk.

Given the historical concentration of the US market, we’ve also taken steps to balance that. The US market has historically been dominated by a few large companies, which can create risks. To address this, we've added more investments that give equal weight to all companies, helping us spread out the risk and keep the portfolio more balanced.

What kind of market environment are you positioning for?

Our positioning is designed to address specific risks without relying on precise market predictions. For instance, we’ve reduced bond portfolio interest rate risk because we believe there’s inadequate compensation for buying longer maturity bonds in the current environment. Similarly, we’ve adjusted our US equity exposure to help protect against any potential downturn in markets there, because of the additional risks posed by that market being so concentrated.

While the future market environment is uncertain, our changes reflect a cautious and risk-aware approach. We’ve historically been effective at protecting portfolios during challenging periods, and this year’s adjustments are in line with that philosophy.

Level 2 2025 AJB Positions

AJ Bell Cautious Fund

AJ Bell Moderately Cautious Fund

AJ Bell Balanced Fund

AJ Bell Moderately Adventurous Fund

AJ Bell Adventurous Fund

AJ Bell Global Growth Fund

AJ Bell Income Fund

AJ Bell Income & Growth Fund

AJ Bell Responsible Screened Growth Fund

Cash

26.0%

19.0%

11.0%

4.0%

2.0%

2.0%

11.0%

2.0%

2.0%

UK Government Bonds

18.0%

9.0%

4.0%

-

-

-

4.0%

-

-

UK Corporate Bonds

16.0%

13.0%

12.0%

8.0%

-

-

12.0%

-

-

Global High Yield Bonds

5.0%

5.0%

5.0%

5.0%

5.0%

-

5.0%

5.0%

5.0%

Global Government Bonds

3.0%

-

-

-

-

-

-

-

-

Global Corporate Bonds

-

-

-

-

-

-

-

-

-

Global High Yield Bonds

-

-

-

-

-

-

-

-

-

Emerging Market Bonds

6.0%

6.0%

6.0%

4.0%

3.0%

-

6.0%

3.0%

3.0%

Cash & Bonds

74.0%

52.0%

38.0%

21.0%

10.0%

2.0%

38.0%

10.0%

10.0%

UK Equities

6.0%

12.0%

14.0%

18.0%

21.0%

24.0%

14.0%

21.0%

21.0%

Europe ex-UK Equities

4.0%

6.0%

8.0%

10.0%

16.0%

16.0%

8.0%

16.0%

16.0%

US Equities

12.0%

17.0%

21.0%

25.0%

21.0%

16.0%

21.0%

21.0%

21.0%

Japan Equities

-

4.0%

6.0%

7.0%

7.0%

9.0%

6.0%

7.0%

7.0%

Emerging Markets ex-China

4.0%

6.0%

9.0%

11.0%

16.0%

21.0%

9.0%

16.0%

16.0%

Pacific ex-Japan

-

-

-

3.0%

3.0%

4.0%

-

3.0%

3.0%

China

 

3.0%

4.0%

5.0%

6.0%

8.0%

4.0%

6.0%

6.0%

Asia Pacific ex-Japan Equities

-

-

-

-

-

-

-

-

-

Emerging Markets Equities

-

-

-

-

-

-

-

-

-

Equities

26.00%

48.00%

62.00%

79.00%

90.00%

98.00%

62.00%

90.00%

90.00%

 

Changes versus 2024 AJ Bell Cautious Fund AJ Bell Moderately Cautious Fund AJ Bell Balanced Fund AJ Bell Moderately Adventurous Fund AJ Bell Adventurous Fund AJ Bell Global Growth Fund AJ Bell Income Fund AJ Bell Income & Growth Fund AJB Bell Responsible Screen Growth Fund
GBP Cash +6.0% +7.0% +4.0% +2.0% - - +4.0% - -
UK Government Bonds +2.0% -1.0% -1.0% - - - -1.0% - -
UK Corporate Bonds -3.0% -5.0% -3.0% -4.0% - - -3.0% - -
Global High Yield Bonds (GBP) - (1.0%) +1.0% +2.0% -2.0% -7.0% +1.0% -2.0% -2.0%
Global Government Bonds -2.0%- -3.0% - - - - - - -
Global Corporate Bonds -8.0% -7.0% -7.0% -7.0% - - -7.0% - -
Global High Yield Bonds - - - - - - - - -
Emerging Market Bonds +6.0% +6.0% +3.0% +1.0% - - +3.0% - -
Cash & Bonds +1.0% -4.0% -3.0%

-6.0%

-2.0% -7.0% -3.0% -2.0% -2.0%
UK Equities - - -2.0% -2.0% -4.0% +1.0% 2.0% 4.0% 4.0%
Europe ex UK Equities +4.0% +3.0% +5.0% +5.0% +9.0% +7.0% +5.0% +9.0% +9.0%
US Equities +5.0% +8.0% +11.0% +9.0% +1.0% +7.0% +11.0% +1.0% +1.0%
Japan Equities 5.0% 3.0% 1.0% - +1.0% +6.0% 1.0% +1.0% +1.0%
Emerging Markets ex-China +4.0% +6.0% +9.0% +11.0% +16.0% +21.0% +9.0% +16.0% +16.0%
Pacific ex-Japan

-

- - +3.0% +3.0% +4.0% - +3.0% +3.0%
China - +3.0% +4.0% +5.0% +6.0% +8.0% +4.0% +6.0% +6.0%
Asia Pacific ex-Japan Equities - - -7.0% -8.0% -10.0% -17.0% -7.0% -10.0% -10.0%
Emerging Markets Equities -5.0% -9.0% -12.0% -14.0% -17.0% -27.0% -12.0% -17.0% -17.0%
Equities +3.0% +8.0% +7.0% +9.0% +5.0% +10.0% +7.0% +5.0% +5.0%
Property -4.0% -4.0% -4.0% -3.0% -3.0% -3.0% -4.0% -3.0% -3.0%
Alternatives -4.0% -4.0% -4.0% -3.0% -3.0% -3.0% 4.0% -3.0% -3.0%

We hope you find this update useful. The AJ Bell funds aren't a personal recommendation. We don't give investment advice, so you should talk to a (suitably qualified) financial adviser if you're not sure where to invest. Past performance is not a guide to future performance and some investments need to be held for the long term.


Written by:
James Flintoft
Head of Investment Solutions

James has over a decade of experience running MPS and managed accounts for intermediaries.

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