Interactive Investor

Coronavirus and funds for the unexpected

24th February 2020 16:21

Jemma Jackson from interactive investor

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Our funds analysts discuss the options for investors during times of crisis.

The spread of coronavirus is another key example of how an unexpected high-risk event can potentially have an impact on markets and the overall economy. 

Teodor Dilov, Fund Analyst, interactive investor takes a look at Marlborough Global Bond fund, iShares Physical Gold ETC (LSE:IGLN) and iShares £ Ultrashort Bond ETF (LSE:ERNS).

Teodor says: “The best antidote for investors’ portfolios is diversification, not just in terms of regional exposure but across different asset classes and currencies too. 

“One option is to take at least some risk off the table, locking in gains, and to look to asset classes that might introduce additional diversification benefits into a portfolio. This would include bonds, alongside traditional haven assets such gold. A cash alternative via short term bond funds may be another area to focus on. 

“Bonds are often regarded as being lower risk and negatively correlated to equities, and therefore could provide some protection in a market downturn. One such fund is the Marlborough Global Bond fund, which features on our super 60 rated list. It is managed by the highly experienced manager, who employs a relatively cautious approach, designed to capture upside while limiting effects of market falls by investing in government and corporate bonds around the world. The portfolio is well-diversified and includes more than 400 bond issues, spread across multiple geographies, credit ratings and duration. Currently, the fund is weighted towards UK and US bonds with sterling and the US dollar being the largest currency exposures.

“Gold is also traditionally used as a hedge during market uncertainty. The easiest way to gain exposure to this theme is buying an ETC and in this category we favour the iShares Physical Gold ETC – another cost effective Super 60 rated fund

“Last but not least, cash is considered by many as almost completely risk-free. However, instead of piling it in their portfolio, investors could allocate some proportion to money markets and ultra-short dated bond funds as a tactical move. iShares Ultra Short-Term Bond ETF is a passive example of such a strategy that may provide both returns and greater diversification.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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