Adventurous and defensive fund pairs

A balanced portfolio is about more than mixing shares and bonds. It’s about combining investments with different drivers of returns so that not everything performs the same way at the same time.

What counts as ‘defensive’, however, is open to interpretation. Some professionals favour wealth-preservation strategies or high-quality bonds, while others prefer a more diversified equity approach.

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Below, fund analysts, wealth managers and financial advisers share the adventurous and defensive fund pairings they believe work well together – and explain why.

Adventurous: First Eagle US Small Cap Opportunity

Defensive: Trojan Fund

The analyst team at interactive investor pairs the conservative, multi-asset Trojan Fund with the higher-risk First Eagle US Small Cap Opportunity to balance capital preservation with long-term growth potential.

“Trojan serves as a resilient core holding, while the First Eagle fund provides a complementary satellite allocation,” says Dzmitry Lipski, head of funds research at ii. “Together, they give investors exposure to both inflation protection and US economic growth without relying heavily on US mega-cap technology stocks.”

Co-managed by Sebastian Lyon and Charlotte Yonge, Trojan combines high-quality equities with sovereign and inflation-linked bonds, gold and cash. The cautious approach aims to preserve capital and deliver long-term real returns, helping to reduce volatility and provide resilience across different market environments, although it may lag during strongly rising equity markets.

First Eagle US Small Cap Opportunity provides exposure to a part of the market where active management can add value. Led by Bill Hench, the team looks for attractively valued US smaller companies with identifiable catalysts for improvement. The approach “offers differentiated growth opportunities but carries higher volatility and liquidity risk due to its exposure to smaller companies”, adds Lipski.

Adventurous: Matthews China Innovators

Defensive: Polar Capital Global Insurance

Fairview Investing director Ben Yearsley pairs two funds he has owned for many years. While one is “definitely adventurous” and the other “dull and slightly predictable”, he says the real attraction is that they have entirely different drivers of returns.

“What I like about these two together is there is no connection between them,” he says. “You have small-cap Chinese innovation-based companies on the one hand and on the other predominantly US specialist insurance companies, where interest rates and underwriting drive returns. Never the twain shall meet.”

Yearsley describes Polar Capital Global Insurance as the dependable half of the pairing. Insurance companies generate returns through investment income and underwriting profits, and by backing well-run businesses, the fund has delivered consistent long-term returns. “Insurance is a necessity even if other luxuries in life aren’t,” he says.

Matthews China Innovators, meanwhile, offers exposure to China’s smaller, innovative companies, particularly in areas such as technology and healthcare, while avoiding many of the country’s state-owned enterprises and property sector. “China is leading the way in tech and healthcare,” says Yearsley. “It’s a racy fund for long-term investors.”

Adventurous: Polar Capital Technology Trust

Defensive: Personal Assets Trust

Peel Hunt's head of investment companies research, Anthony Leatham, pairs the high-growth potential of Polar Capital Technology Trust (LSE:PCT) with the capital preservation focus of Personal Assets Trust (LSE:PNL).

Polar Capital Technology Trust offers actively managed exposure to global technology companies, with the portfolio currently focused on the long-term opportunities created by artificial intelligence. Holdings span areas including chip designers, semiconductor equipment makers, hyperscalers and devices.

Leatham believes the trust provides an “expert-level access point” to disruptive innovation. “Valuations are high, but growth prospects are even higher,” he says. “AI usage still has plenty of room to expand as models improve, the number of use cases grows and adoption levels increase.”

To balance that higher-risk exposure, he pairs it with Personal Assets Trust, a flexible multi-asset trust designed to “win by not losing” across different market cycles. The portfolio combines high-quality global equities with inflation-linked bonds, gold and currencies to help protect investors during periods of market stress.

“While the strategy may lag strongly rising equity markets, it aims to limit permanent loss of capital and deliver dependable returns,” says Leatham. “We believe it pairs well with the high-octane growth potential of Polar Capital Technology.”

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Adventurous: Pershing Square Holdings

Defensive: BH Macro

Capital Gearing Trust (LSE:CGT) uses a combination of Pershing Square Holdings (LSE:PSH) and BH Macro (LSE:BHMG) as part of its broader approach to balancing risk and return.

“We manage a defensive fund of our own, so it takes a lot for us to want to recommend a competitor’s,” says Chris Clothier, co-chief investment officer of CG Asset Management.

“BH Macro is an interesting option because it tends to be structurally long volatility – meaning that it profits from rising volatility – and so it does well in times of market stress.”

He points to returns during the Covid-19 sell-off in 2020 and following Russia’s invasion of Ukraine in 2022. “It had a rare misstep at the outbreak of the Iran war, losing 6% that month, but we remain confident this is one fund that can keep its head when all about it are losing theirs.”

Pershing Square provides concentrated exposure to large-cap US equities. While performance has been solid over the long term, underperformance this year has led to discount widening.

Clothier notes the much narrower discount on its recently launched sister fund in the US. “We think this difference will soon attract relative value players and cause the discounts to converge,” he adds.

Adventurous: Fidelity Index World

Defensive: BlackRock Corporate Bond 1-10 Year

First Wealth uses Fidelity Index World as the growth engine in its client portfolios, pairing it with BlackRock Corporate Bond 1-10 Year to balance equity exposure with defensive ballast.

The Fidelity fund offers broad, low-cost exposure to around 1,300 of the world’s largest companies.

“We’ve held it across our model portfolios for several years and it provides a reliable foundation from which the rest of the portfolio can do more targeted work,” says chartered financial planner Ben Brown.

The fund tracks the global market, with North America making up the majority of the allocation, “reflecting where global corporate value sits”, says Brown.

The BlackRock fund has an average maturity of around five years, versus roughly eight years in the broader BlackRock Corporate Bond fund. It is shorter dated, more broadly invested and meaningfully less volatile.

“This fits our view that bonds are equity diversifiers rather than return generators,” says Brown. “Their job is to cushion portfolios in times of market stress, not to add risk in pursuit of yield.”

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Adventurous: Scottish Mortgage

Defensive: Monks

QuotedData senior analyst Matthew Read suggests Scottish Mortgage (LSE:SMT) and Monks (LSE:MNKS) as a pairing for investors seeking long-term capital growth with a more balanced risk profile.

Strictly speaking, Monks is far from a defensive fund in the traditional sense, but when set alongside Scottish Mortgage it provides a more diversified and measured way of accessing the same global growth opportunity. Read also notes that overlap between the two trusts is lower than many investors assume, at around 20%.

“Scottish Mortgage is the high-octane side of the pairing,” he says. The unconstrained global growth trust invests in around 45 companies, both public and private, with its managers targeting asymmetric returns from companies driving transformative change.

“Investment performance can be very strong, but investors must also be comfortable with volatility, periods of sharp underperformance and exposure to higher-risk areas,” says Read.

Monks offers a more diversified expression of the same investment philosophy. Also managed by Baillie Gifford, it retains a long-term growth focus but spreads exposure more broadly across companies, sectors and geographies.

“Together, the two trusts give investors access to global companies capable of compounding at attractive rates over long periods,” adds Read.