Talking Point  

Defensive assets are slipping out of fashion

Defensive assets are slipping out of fashion

Most advisers have not allocated clients’ assets to a defensive portfolio, according to the latest FTAdviser Talking Point Poll. 

The poll asked advisers the following question: “How far have you allocated clients’ assets to a defensive portfolio?”

Most advisers who responded (43 per cent) said not at all. 

One third of advisers said they allocated only a little to defensive assets. 

Some 10 per cent said quite extensively, meanwhile only 14 per cent of advisers have solely invested clients’ money into defensive assets. 

Alasdair McKinnon, lead fund manager of the Scottish Investment Trust was not surprised by the results. 

“As markets have generally had a healthy 2019 it is unsurprising that the current survey positioning is essentially bullish.”

He added: “Defensive assets have been out of fashion this year and, in aggregate, people want to give the ‘right’ answer.”

Defensive assets typically include investments such as cash and fixed interest securities such as bonds. They usually pose lower risk and return levels. 

Defensive assets are often added to multi-asset funds to diversify returns. 

Scott Gallacher, chartered financial planner at Rowley Turton Private Wealth Management, said most advisers will aim to construct well-diversified portfolios tailored to their clients particular risk profiles.

He added that he does not expect short-term market concerns to increase asset allocation to defensive assets as advisers often tell their clients to adopt a long-term view. 

Mr Gallacher said: “Many advisers use a range of managed or multi-asset type funds where the fund managers may well be adding defensive assets; consequently [these situations] would be even less reason  to specifically add defensive assets for their clients.”

Mr McKinnon said: “If markets have a tumble, as they did at the end of last year, defensive assets provide some cushion to break the fall."

“There is no ideal allocation for defensives but perhaps the key point is to ensure that there is a sufficient amount, in order to avoid panic selling at a market low,” added Mr McKinnon.