Defensive ‘wealth preservation’ funds are falling along with the rest of the stock market Can defensive funds protect your money during market falls? Funds designed to protect investors’ savings when stock markets fall have lost money this year, failing those who had banked on their defensive reputations. Share prices have slumped since the start of the year as the outbreak of war in Europe, rampant inflation and a fresh Covid lockdown in the Chinese city of Shenzhen spooked investors. The FTSE Global All Cap index, which tracks the performance of the world’s stock markets, has fallen by 6pc this year.
Many DIY investors rely on popular “wealth preservation” investment trusts to protect their money during market falls, but they have failed to deliver so far this year. The RIT Capital Partners, Personal Assets and Capital Gearing trusts have all struggled to make gains since January, falling by 7pc, 2pc and 1pc respectively. The Ruffer Investment Company is the only capital preservation trust to have generated positive returns since the start of the year; it has gained 6pc.
Only Ruffer has delivered positive returns this year Line chart with 5 lines. View as data table, Only Ruffer has delivered positive returns this year The chart has 1 X axis displaying Time. Data ranges from 2021-12-31 00:00:00 to 2022-03-15 00:00:00. The chart has 1 Y axis displaying Values. Data ranges from -15.2727 to 7.8498. End of interactive chart. The trusts are designed to preserve the value of savings, so must return at least as much as inflation. However, the cost of living crisis has made it harder for managers to achieve this goal, especially when stock markets fall.
In January inflation in Britain hit 5.5pc for the first time since the 1990s and the Bank of England has forecast that it could peak in April at 8pc. William Heathcoat Amory of the research firm Kepler Intelligence said the fund managers faced a more challenging economic environment to generate returns as war in Europe and surging energy prices added to global inflation. “Ruffer has done very well because it has inflation-linked bonds and the crisis in Ukraine will undoubtedly add to inflation. The trust has also benefited from its gold exposure,” he said.
Ruffer has about 8pc invested in gold, which has rallied by 6pc this year thanks to its reputation as a safe haven in volatile times.