Reading the signs of financial markets is always difficult, and the market environment today makes for a particularly tough analysis.
Investor concerns are rising for a variety of reasons that focus on the most important issue of all: how can they protect their capital against the risk of a market sell-off now that this bull market is one of the longest on record?
Investec Asset Management believes the answer to this question lies in building a good investment defence - or ‘defensificaiton'.
The group's Diversified Income Fund, managed by portfolio managers John Stopford and Jason Borbora, aims to deliver ‘defensive' income of between 4%-6% alongside capital growth by looking beyond the traditional, simplistic ‘top-down' approach to portfolio construction that many investors adopt.
Stopford and Borbora believe the characteristics of an asset class matter much more than its ‘equity', ‘bond' or ‘alternative' label. Therefore, instead of focusing on traditional asset allocation, or holding a fixed proportion of bonds, equities and other asset classes in a portfolio, the managers choose to place a greater emphasis on understanding an investment's ‘true' behaviour and its relationship with the economic cycle.
In doing this, they seek to construct a portfolio that is genuinely diversified across a range of assets with growth, defensive and uncorrelated characteristics.
Moreover, by investing only in securities with sustainable income streams and capital growth potential, Stopford and Borbora believe they can build a portfolio that is better able to handle episodes of market weakness and reduce the severity of drawdowns and thus able to provide core ‘defensification'.
Click here to read an exclusive eBook detailing how Investec Asset Management's ‘Defensification' practices work, and how they have delivered an income of between 4%-6% per annum since launch.