Every time equity markets go through a period of turbulence, with higher drawdowns and higher volatility, investors’ interest for defensive assets or defensive investing spikes. However, at that point in time, it is already too late. Money has been lost and it will take even larger gains to recover that money starting from a reduced capital base.
Timing the markets is incredibly difficult. Market crashes can be triggered by an infinite number of economic or geopolitical events that cannot be anticipated. Relying on switching between low beta assets and high beta assets at the exact right time is therefore a very risky strategy.
To protect their investments and build their wealth from a cycle to the next, investors should build all-weather, versatile portfolios that can resist unexpected events, reduce drawdowns and participate on the upside.
At WisdomTree, we use our Defensive Asset Framework to test and compare assets for that exact purpose; focusing on Risk Reduction, Asymmetry of Returns, Diversification and Valuation.
Balancing protection and upside potential is a difficult exercise. To help investors find some ideas and inspiration on how to tackle this challenge, we produced a series of blogs to assess which investments and which allocation techniques fare best in changing market conditions.
Introducing our Defensive Asset framework to assess how different type of investments would fare in changing market conditions.
We look at equities and illustratethe behaviour of defensive equities in crisis but also in late part of the cycle the advantages and the pitfalls of defensive investing.
We look at some of the advantages and drawbacks of the different fixed income assets when trying to protect a portfolio against equity risk.
Focusing on currencies, analysing their behaviour in crisis and looking at their current fundamentals.
Assessing the combinations between funded assets like government bonds or equities with a currency overlay through the prism of our defensive framework.
How precious metals such as Gold can bring diversification and defensiveness to a portfolio.
We illustrate how properly constructed defensive portfolios can potentially outperform more offensive portfolios over the long term.
Analysis of the potential advantages of rule based dynamic strategies when trying to reduce portfolio drawdowns.
In the first quarter of 2020, markets have tested the resilience of portfolios with volatility on the upside as well as on the downside. What lessons should we learn to prepare for the rest of the year?
WisdomTree Quality Dividend Growth
This strategy provides access to high quality companies in terms of returns on equity, returns on assets and expected earnings growth, which are likely to grow their dividends whilst maintaining their quality aspects.
WisdomTree Gold
Gold’s role as a financial and geopolitical hedge as well as inflation hedge is well established. WisdomTree provide Europe's leading range of Gold ETCs, with synthetic and physically backed exposure, currency hedged or in US dollars, leveraged or unleveraged.
WisdomTree Enhanced Broad Commodities
This strategy aims to deliver strong diversification with a basket of 23 commodities across precious metals, industrial metals, energy and agricultural commodities. The approach optimises the carry using a smart systematic rolling method that can reduce risk and generate long-term alpha.
