Three years on: which defensive funds have delivered?

The wall surrounding the city of Ávila in Spain. Credit: CHUYN.

Defensive investing can mean different things to different investors. 

For some, it is about limiting losses when equity markets fall. For others, it means generating a steady return with less volatility, protecting against inflation or simply providing a source of return that behaves differently from equities.

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Three years ago, we asked a range of fund selectors and wealth managers to name their preferred defensive funds, looking beyond the traditional home of wealth preservation trusts to identify strategies that could both protect and grow capital.

Three years is long enough to put those calls to the test. 

“Revisiting this now is a great idea – all too often we are asked to think about much shorter time frames,” says James Carthew, head of investment company research at QuotedData.

The results are revealing. The nine funds have produced a wide range of returns, from just 1.3% for Neuberger Berman Uncrld Strs GBP P AccH (BFXBF43) to 66.4% for Ecofin Global Utilities & Infra Ord (LSE:EGL). 

Over the same period, the FTSE All-Share returned 58%, while the MSCI World gained 64.8% in sterling terms. UK consumer prices rose 8.9%.

That makes the strongest performers particularly striking. 

Ecofin Global Utilities & Infrastructure and Pantheon Infrastructure Ord (LSE:PINT) (+55.8%) have benefited from a powerful investment theme that few could have predicted would become such an important driver: the surge in spending on artificial intelligence (AI) infrastructure.

Carthew, who selected the top two funds, says: “Both have delivered performance ahead of where we had envisaged three years ago because of the AI capex phenomenon.

“Having been steady for a number of years, US power prices started to rise as AI data centres created extra demand for power. That has been extremely beneficial for power generation companies.”

Nine defensive fund picks: three-year total returns

Source: FE Analytics/interactive investor, 11 August 2026. Past performance is not a guide to future performance.

But performance is only part of the story when assessing a defensive fund. 

A strategy designed to preserve capital should not necessarily be expected to keep pace with a rising stock market, and a fund that has delivered a lower return with significantly less volatility may have done exactly what investors needed it to do.

Trojan Fund X Accumulation (BZ6CNS3) (+22.4%), for example, trailed the FTSE All-Share but comfortably beat UK inflation. 

Janus Henderson Absolute Return I Acc (B5KKCX1) (+21.7%) was broadly in line with its Investment Association (IA) Targeted Absolute Return sector (+22.1%), which can be a disparate group of funds. But it was meaningfully ahead of the cumulative return from its Bank of England base rate benchmark (+14.3%).

The exercise also highlights how quickly the investment landscape can change. 

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Some of the original funds are no longer being used by the wealth managers that selected them, while others have closed or are in the process of winding down.

BRI Wealth Management no longer holds ARC TIME UK Infrastructure Inc II C Acc (BP5GQC1) (+17.60%). 

Other funds it uses for infrastructure exposure and defensive ballast include Pantheon Infrastructure and Trojan.

At the bottom of the performance table, Neuberger Berman Uncorrelated Strategies closed on 31 March following steep outflows after a period of underperformance, and Arbuthnot Latham had exited the fund prior to our three-year review.

Jason Da Silva, director of global investment strategy, says: “While the fund generally achieved its objective of helping to protect capital during periods of market stress, it has been less successful at generating consistent returns over time.

“Several of the underlying strategies that were expected to produce steady gains in normal market conditions failed to meet expectations. Some struggled as market conditions changed, while others found it difficult to adapt to increasingly unpredictable and policy-driven markets.”

JPMorgan Global Core Real Assets Ord (LSE:JARA) (+7.05%) is also in wind-down and has become an increasingly small part of IpsoFacto Investor’s portfolio.

Director David Liddell says: “We’ve been happy to hold it as the trust has steadily returned cash to shareholders at close to NAV [net asset value] over the past year or so.”

For new investments, Liddell would look instead to infrastructure or renewables, or to a strategic bond fund.

What now?

So, which defensive funds would the experts favour today? 

The new list ranges from infrastructure debt and short-duration bonds to absolute return, multi-asset income and even value-focused equities, reflecting the many ways investors can build resilience into a portfolio.

GCP Infrastructure

Having seen his original picks outperform expectations, Carthew is looking elsewhere for his new infrastructure choice: GCP Infrastructure Investment Ord (LSE:GCP) invests in infrastructure debt rather than equity and arguably has a lower risk profile than other trusts in the sector.

It trades at a 17.5% discount that its board is determined to close and offers an 8.5% dividend yield, while a portfolio reshaping aims to reduce exposure to equity-like risks and power-price forecasts.

“The manager is highly focused on avoiding downside risk where possible,” says Carthew. “With equity markets looking pretty expensive, GCP’s steady returns may prove relatively attractive.”

Janus Henderson Absolute Return

Quilter Cheviot continues to hold its pick from three years ago, Janus Henderson Absolute Return I Acc (B5KKCX1), which has provided stability despite unsettling events like Liberation Day and the US-Iran war.

“Both core and tactical ideas have contributed positively, and the fund has defended capital well during sharp market drawdowns,” says fund research analyst Ghaz Saleem.

“While some other ‘defensive’ funds have generated a higher total return, they have been far more volatile.”

FundCalibre managing director Darius McDermott regards Janus Henderson Absolute Return as “a good choice for ballast”.

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Trojan

Having produced a meaningful positive real return, conservative multi-asset fund Trojan Fund X Accumulation (BZ6CNS3)retains its place on the list. 

Its portfolio combines equities with government and inflation-linked bonds, gold and cash, giving it several sources of diversification and a strong focus on capital preservation.

“Performance has been strong relative to the fund’s capital preservation objective,” says Dzmitry Lipski, head of funds research at interactive investor. 

He adds that Trojan has demonstrated “good downside protection”, with smaller drawdowns than UK equities, supporting its status as a core defensive holding.

Artemis Monthly Distribution

Artemis Monthly Distribution I Inc (B6TK3R0) offers a more conventional multi-asset approach, combining global equities and bonds with a focus on managing risk across different market conditions.

“The relatively diversified allocation across global equities and corporate bonds provides multiple sources of income while helping to moderate portfolio volatility during periods of equity market weakness,” says Lipski.

Its valuation-driven equity approach and focus on higher-quality corporate bonds also reduce reliance on expensive growth stocks and long-duration government bonds, which Lipski believes should help improve the fund’s resilience as inflation and bond yields remain elevated.

Artemis Short-Duration Strategic Bond

Short-duration bonds can offer attractive income with less interest rate risk than longer-duration strategies. 

FundCalibre’s McDermott deems Artemis Short-Duration Stgy Bd I GBP Inc (BJXPPJ8) “an excellent fund for those who dislike volatility but want a better return than cash”.

The fund has a flexible approach to fixed income, with the ability to go both long and short. 

“It is never going to shoot the lights out, but for those looking to preserve their capital with a reasonable return, this should be a consideration,” says McDermott.

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iShares $ Short Duration High Yield Corporate Bond ETF

High-yield bonds might seem an unlikely defensive choice, but Arbuthnot Latham’s Da Silva points to the short duration of the iShares $ Short Dur HY CorpBd ETF $ Dist GBP (LSE:SDHG) ETF as a source of protection. 

Shorter maturities reduce sensitivity to interest rate changes, while its focus on higher-quality high yield bonds limits exposure to distressed borrowers.

“Although high yield may not appear an obvious defensive allocation, the short-duration approach gives it several potentially valuable protective characteristics,” he says.

A dividend yield of around 6.2% can support total returns and help cushion losses during periods of market weakness, he adds.

M&G Credit Income

Anthony Leatham, head of investment companies research at Peel Hunt, suggests M&G Credit Income Investment Ord (LSE:MGCI), which combines an investment grade bias with low duration and a 7.9% yield.

The trust has remained deliberately cautious as credit spreads have compressed, giving it liquidity to deploy if more attractive opportunities emerge.

“For investors prioritising capital preservation and diversification, we see M&G Credit Income as a strong candidate where cautious investors get paid to wait,” says Leatham.

Temple Bar

Temple Bar Ord (LSE:TMPL) is perhaps the least obvious defensive choice, but Carthew sees an opportunity in its focus on cheaper UK equities and value stocks. 

The managers favour decent-quality companies to avoid value traps, which he believes could prove resilient if the economy weakens.

Carthew also sees a parallel with the bursting of the technology bubble in 2000. 

“It seems likely to me that the AI capex boom will run out of steam eventually and many stocks that are riding high may come down to earth with a bump,” he says. “Temple Bar offers a way of avoiding that fate.”