Talking Point  

Building a defensive portfolio in unpredictable times

  • Identify how the technique for building defensive portfolios has changed
  • Describe the different market situations in which to build a defensive portfolio
  • Identify the different types of assets that be used in a defensive portfolio
CPD
Approx.30min
Is it time to build a defensive portfolio?
How advisers can build a defensive portfolio in a fluctuating economy
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When it comes to building a defensive portfolio, the challenge that has faced advisers is understanding the direction of the market and the outlook for the economy.

In the event of an economic downturn, traditionally, government bonds would rise in price as investors take the view that, even in the worst of all worlds, governments can make payments, making the bonds they issue a safe haven.

That means, historically, that advisers wanting to construct a defensive portfolio simply had to sell off some of the equities they own, and buy more government bonds.

But what has traditionally worked in terms of defensive equity exposure may not work this time, as a result of the correlation between equities and bonds and the level of unpredictability in world politics.

This guide will look at the how advisers and fund managers are exploring what it means to have a defensive investment strategy in this new world.

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. Why does Thuska Maharaj believe that equities would offer protection against the risk of inflation, so are defensive?

  2. In a defensive portfolio which type of equity funds would advisers typically choose?

  3. According to James Burns, how can structured products be used to gain protection from falling equity markets?

  4. What is John Husselbee’s biggest concern about absolute return funds?

  5. True or false, Thuska Maharaj does not view Japanese equities as a defensive asset in the current climate.

  6. What happens when investors buy bonds for defensive protection?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Identify how the technique for building defensive portfolios has changed
  • Describe the different market situations in which to build a defensive portfolio
  • Identify the different types of assets that be used in a defensive portfolio

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