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
The merger with L1 Capital will “inject new life” into Platinum, Morningstar believes, but is unlikely to boost Platinum’s declining funds under management.
More than half of the top 20 most popular shares bought by advised investors during the first half of 2025 were ETFs, according to AUSIEX data.
At least two-thirds of ETF flows are understood to be driven by intermediaries, according to Global X, as net flows into Australian ETFs spike 97 per cent in the first half of 2025.
Inflows for the first half of 2025 for GQG Partners stand at US$8 billion, but the firm has flagged fund underperformance could be a headwind for future flows.
