Five of the Best: Defensive plays in choppy markets

Martin Gray runs the £695m Miton Special Situations fund, which has returned 3.2% over the year to 11 November, ranking it second in the IMA Balanced Managed sector.

Over three years the fund slips down the rankings, returning 23.4% against an average 31.2%, but over five years it is back in the top quartile with a 37.9% return.

Here Gray outlines five defensive strategies for today’s challenging market conditions.

1. Asian low risk assets

"This would be a combination of cash and short-dated bonds. We play this theme through the Schroder Asian Bond fund which is 3% of the fund."

2. Large-cap sustainable yielders

"We like funds such as Mark Barnett’s Invesco Perpetual UK Strategic Income and Nick Train’s Lindsell Train UK Equity. At the individual stock level, I would start with the UK, because you are getting international exposure anyway from FTSE 100 companies such as utilities, GlaxoSmithKline and Vodafone.

"I would be avoiding the UK banks and mining stocks such as Rio Tinto.

3. Japan

"I have recently added to a position in Stephen Harker’s GLG Japan CoreAlpha which now makes up 3% of the portfolio."

4. Asian currencies

"We would focus on those from the major markets, especially the Singapore dollar. It fell back 6%-7% in September and may weaken from here in the short term, but on a three- to five-year view I expect it to appreciate.

5. Property

"UK REITS in particular - I have just opened a new position here. British Land is on a 6.5% yield which is very attractive on a long-term view."

And what to avoid....

"I would steer clear of commodities and commodity currencies such as the Australian and Canadian dollars until we can see what is happening to China’s growth," he said.

"If you think it will remain stable and see reasonable growth, the Canadian dollar and Brazilian real may be sensible plays, but if you think China will struggle to maintain growth, you may want to avoid currencies linked to commodities."