Talking Point  

Multi-asset is best strategy for defensive exposure

Multi-asset is best strategy for defensive exposure

More than half of advisers said investing in multi-asset is the best solution for investors seeking defensive exposure, according to the latest FTAdviser Talking Point poll. 

The poll asked advisers the question: “Given the valuation of both bonds and equities look high by historical standards, what are the options for investors who want defensive exposure?” 

More than one in two (55 per cent) of advisers said multi-asset is the most popular solution to achieving defensive exposure. 

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Some 23 per cent advisers said holding cash is the next best option, while almost one fifth (18 per cent) advisers would recommend their clients to invest in infrastructure for defensive exposure. 

Matt Riley, head of dynamic research solutions Natixis Investment Managers, said: “Because of the broad investment mandate multi-asset managers often have more flexibility to reduce or increase portfolio risk based on their assessment of market developments."

He added if multi-asset managers adjust correctly, a multi-asset manager can gradually shift into a defensive position in the lead-up to a bear market and can give more opportunities for diversification and hence risk reduction.

Hannah Owen, financial planner at Quilter Private Client Advisers, says: "An investor can also choose a low risk multi-asset fund for a defensive view which likely hold a lower proportion of equities than a similar higher risk multi-asset fund."

Most experts were unsurprised that absolute returns strategy was least favourable. 

Mr Riley said: “The absolute return sector as a whole saw large outflows over the past months. The promise of absolute return funds is to have a positive return in all market conditions and recently a number of managers in this sector didn’t fulfil that promise.”

Data from the Investment Association, the trade body that represents UK asset managers, showed that in March 2018, the absolute return sector was the worst selling IA sector in the month as investors withdrew £665m from the asset class. 

Ms Owen added: “Cash is important to hold within a portfolio but cash doesn’t keep pace with inflation. Whilst cash and fixed interest provide safety in the portfolio, if growth is wanted in the portfolio, then other assets are needed.”