Is it a good time for investors to turn to the defensives?
Australian investors might want to consider global listed infrastructure stocks which have traditionally a low correlation to the AUD, domestic equities and global bonds at the time of turmoil caused by the recent outbreak of coronavirus which spooked markets, RARE Infrastructure says.
According to Nick Langley, co-founder and senior portfolio manager at RARE Infrastructure, investor portfolios should always contain some level of defence that as long as it was appropriate for the investor's objectives or market conditions.
At the same time, their portfolios should remain prepared to accommodate any negative events whether it was the tech bubble burst, the global financial crisis (GFC), or a global health crisis.
“An ideal ‘defence’ investment is one whose value is to some extent insulated from the full force of a market downturn but will experience a reasonable percentage of the upside when the market moves in a positive direction,” Langley said.
“Fixed interest and cash are generally regarded as the default defensive asset classes but another is listed infrastructure, which is RARE’s singular speciality.
“Within this asset class, we favour regulated assets such as water and energy distribution – poles, wires and gas pipelines - which have high income but low exposure to fluctuations in GDP,” he said.
“These defensive ‘defence’ investments can be mixed with user-pay assets which generally have concession-based contracts with toll roads, rail, ports and airports but typically have lower income returns and are relatively higher leveraged to GDP.”
AUTHOR
Oksana Patron
Recommended for you
Tribeca Investment Partners has made a distribution hire from Australian Ethical in a newly-created role focused on the national intermediary market.
Asset managers may be urged to diversify their product ranges, but investment executives have warned any M&A deal should avoid simply filling gaps and instead consider long-term value creation.
Specialist wealth platform provider Mason Stevens has become the latest target of an acquisition as it enters a binding agreement with a leading Sydney-based private equity firm.
Fund managers are entering 2025 with the most bullish sentiment since August 2021 and record high allocations to US equities, thanks to the incoming Trump administration.
