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Defensive Global Funds

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Sue58Sue58 Forumite
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I'm currently looking to invest in a global fund that is reasonably defensive and at the moment I'm considering the Trojan Global Equity O fund. I do appreciate that most global funds are mainly 100% equity and I'm OK with that but some funds are very adventurous whereas others are reasonably defensive. Has anybody got any other suggestions for defensive global equity funds?  
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  • PrismPrism Forumite
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    Its difficult to be sure. Morningstar rates equities in the categories of health, utilities and staples as being more defensive than others. However these types of equities have been relatively expensive for the last few years as they also tend to pay good reliable dividends which are also in demand. So although the companies themselves are likely to do pretty well during a downturn, the share prices have got a fair way to drop.
    Anyway, on that basis the usual regulars like Fundsmith, Lindsell Train, Morgan Stanley global brands and Evenlode global income fall into that category, along with some of the passive low vol and quality variants. 
    Will it work next time? Who knows
  • AlbermarleAlbermarle Forumite
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    I do appreciate that most global funds are mainly 100% equity and I'm OK with that but some funds are very adventurous whereas others are reasonably defensive.

    Normally when referring to defensive funds , it means ones that will not lose much value in a big market drop . I can not see how any 100% equity fund can therefore be referred to as defensive . Maybe some are more or less aggressive than others.

    Defensive investments often mentioned on here are the investments trusts : Capital Gearing & Personal Assets. maybe worthwhile having a look at their holdings  to get an idea of their strategies. 

  • Alice_HoltAlice_Holt Forumite
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    I hold Capital Gearing, Personal Assets Trust, and also RIT Capital Partners as defensive funds. 
    I am also directing new contributions into the Vanguard LS 60 fund rather than LS80.

    It would also depend on how your overall asset allocation stands between, say, cash ISA's at the base, and up to adventurous 100% equity funds.
    Alice Holt Forest situated some 4 miles south of Farnham forms the most northerly gateway to the South Downs National Park.
  • Sue58Sue58 Forumite
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    I do appreciate that most global funds are mainly 100% equity and I'm OK with that but some funds are very adventurous whereas others are reasonably defensive.

    Normally when referring to defensive funds , it means ones that will not lose much value in a big market drop . I can not see how any 100% equity fund can therefore be referred to as defensive . Maybe some are more or less aggressive than others.

    Defensive investments often mentioned on here are the investments trusts : Capital Gearing & Personal Assets. maybe worthwhile having a look at their holdings  to get an idea of their strategies. 

    I was meaning a less aggressive global equity fund than some of the more adventurous/aggressive ones. I already hold some wealth preservation funds and a decent cash buffer so this is for my growth portfolio in my ISA. At the moment I'm invested in VLS100 but I'm thinking of changing to active funds. As I mentioned I'm considering the Trojan Global Equity fund but also looking at Bankers IT and Evenlode Global Income.
  • aroominyorkaroominyork Forumite
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    I hold a few active funds which in theory have reasonable downside protection but they are regional, not global. As Prism said, Fundsmith/LT have less cyclical exposure than many other funds but given how far those growth funds have grown it's far from certain that they will hold up in the next correction/crash. If you want to see the kind of staples that are thought to be safer in recessions have a look at XDWS, a world consumer staples ETF. 
  • StellaNStellaN Forumite
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    Sue58 said:
    I do appreciate that most global funds are mainly 100% equity and I'm OK with that but some funds are very adventurous whereas others are reasonably defensive.

    Normally when referring to defensive funds , it means ones that will not lose much value in a big market drop . I can not see how any 100% equity fund can therefore be referred to as defensive . Maybe some are more or less aggressive than others.

    Defensive investments often mentioned on here are the investments trusts : Capital Gearing & Personal Assets. maybe worthwhile having a look at their holdings  to get an idea of their strategies. 

    I was meaning a less aggressive global equity fund than some of the more adventurous/aggressive ones. I already hold some wealth preservation funds and a decent cash buffer so this is for my growth portfolio in my ISA. At the moment I'm invested in VLS100 but I'm thinking of changing to active funds. As I mentioned I'm considering the Trojan Global Equity fund but also looking at Bankers IT and Evenlode Global Income.
    If you already have the wealth preservation and cash part of your portfolio covered, then purely for growth (if income is still not required at this stage) there is nothing wrong with holding a few different less aggressive/more defensive global funds if that is what you feel is right for you. Recently, on another thread it was mentioned that some forum members hold a number of different global IT's to diversify and spread the risk especially in large portfolio's . Therefore, in my own personal opinion I see nothing wrong with holding all three of the funds you mentioned above as long as there is not a big crossover/duplication of holdings?     
  • LintonLinton Forumite
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    To avoid confusion with terminology:
    "Defensive" normally refers to shares in companies that are not directly affected by the state of the economy - eg food and household essentials.  This is as opposed to "cyclical" companies that do good business when the economy is booming and are particularly hit when not - eg luxury goods, raw materials. A well balanced fund would include both cyclical and defensive companies though some active fund managers have the view that the more steady growth provided by defensive companies is advantageous in the long term. 

    Funds that allocate between equity and other assets so as to significantly reduce the effect of equity crashes are normally called "cautious".  Whether a fund is cautious or not is fundamental and is determined by its objectives.

  • AudaxerAudaxer Forumite
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    Linton said:
    To avoid confusion with terminology:
    "Defensive" normally refers to shares in companies that are not directly affected by the state of the economy - eg food and household essentials.  This is as opposed to "cyclical" companies that do good business when the economy is booming and are particularly hit when not - eg luxury goods, raw materials. A well balanced fund would include both cyclical and defensive companies though some active fund managers have the view that the more steady growth provided by defensive companies is advantageous in the long term.  
    When I looked at Fundsmith Equity, I noticed that it had 57% Defensive and less than 13% Cyclical stocks. So that appears to be quite defensive compared to other 100% equity funds, but it puzzles me as to how it has produced such high returns if it is a defensive fund. Can anyone explain?
  • PrismPrism Forumite
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    Audaxer said:
    Linton said:
    To avoid confusion with terminology:
    "Defensive" normally refers to shares in companies that are not directly affected by the state of the economy - eg food and household essentials.  This is as opposed to "cyclical" companies that do good business when the economy is booming and are particularly hit when not - eg luxury goods, raw materials. A well balanced fund would include both cyclical and defensive companies though some active fund managers have the view that the more steady growth provided by defensive companies is advantageous in the long term.  
    When I looked at Fundsmith Equity, I noticed that it had 57% Defensive and less than 13% Cyclical stocks. So that appears to be quite defensive compared to other 100% equity funds, but it puzzles me as to how it has produced such high returns if it is a defensive fund. Can anyone explain?
    Most of the heavy lifting over the first 5 years was done by a rush to defensive dividend paying stocks after the financial crisis. Over the last 5 its been mainly software companies like Microsoft, Intuit and Amadeus that have created good returns with just two defensives doing really well - Estee Lauder and IDEXX
  • MarkCarnageMarkCarnage Forumite
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    Defensive can mean companies that operate in sectors which are less vulnerable to a general economic recession, or also stocks which have a 'defensive moat' in terms of a dominant market position with high entry barriers. Both of these types of stock should be inherently cash generative in most cases, which assists with capex/dividend funding.
    One danger is that they might become vulnerable to disruptive technology and/or business models which are overlooked or underestimated by the market. The valuations of many so called defensive growth stocks do not allow for much leeway for anything unfavourable. 
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