Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest.

There are lots of reasons to be cautious at the moment, with the wars in the Middle East and in Ukraine adding to the risk of recession in the west. With such an uncertain backdrop, investors need to make sure that they have sufficient defensive holdings in their portfolios.

A good example is Pyrford Global Total Return Sterling Fund, which is a member of the Fidelity Select 50 list of handpicked funds. It aims to provide a stable stream of returns that beats the rate of inflation over the long-term, while at the same time minimising volatility and offering significant downside protection.

Pyrford uses a multi-asset approach that is designed to avoid capital losses when markets fall by actively allocating between equities, government bonds and cash. The defensive nature of the portfolio is further enhanced by avoiding stocks that are considered to be high risk on the basis of their fundamentals.

Last year would have been especially challenging for this type of strategy, as a series of unprecedented events hit all the different asset classes. Despite this, the fund was still able to make 2.2% before fees over the course of the 12 months and since inception it has achieved an annualised return of 3.05%.1 Please note past performance is a not a reliable indicator of future returns.

Source: Yahoo Finance from 31.10.18 to 31.10.23 Basis: Bid to bid with income reinvested. Excludes initial charge. 

Past performance is not a reliable indicator of future returns 

In the interim accounts for the six months to the end of June, the managers highlight the fact that governments are continuing to issue significant amounts of debt at the same time as central banks are raising interest rates. The result is a huge interest bill that for the US government hit a record high of $1.2 trillion over the last 12 months, which is over $100bn more than it spent on defence.2

Ultimately, they think that central banks will have to revert to printing money (quantitative easing) to alleviate the burden, but with inflation still sticky we have not reached that moment yet. If the central banks refuse to finance the government debt, then the liquidity would have to be pulled out of the system to pay for it and there are plenty of assets that would suffer as a result.

Given these risks, the fund currently has a model allocation of 62% bonds, 35% equities and 3% cash. The fixed income portion is invested in short duration securities to minimise the impact of rising interest rates. These should provide significant capital protection and are highly liquid.

The equity allocation consists of defensive companies that the managers would expect to do well during volatile periods. When choosing the individual stocks their focus is on balance sheet strength, profitability, earnings visibility and value.

The managers currently favour Asia ex-Japan, as it offers sustainable economic growth supported by increased labour output or improved productivity. The valuations in this region are also reasonable, unlike the US where the market is considered to be overvalued.

More on Pyrford Global Total Return Sterling Fund

(%) As at 6 Nov






Pyrford Global Total Return Sterling Fund 






Past performance is not a reliable indicator of future returns

Source: FE from 6.11.18 to 6.11.23 Basis: Bid to bid with income reinvested. Excludes initial charge.

1 Pyrford International Ltd / State Street Global Services (Ireland) Ltd, December 2015 to 31 July 2023. 

2 Columbia Threadneedle, 30 June 2023.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. The Pyrford Global Total Return Sterling Fund invests in overseas markets and so the value of investments could be affected by changes in currency exchange rates. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. The fund uses financial derivative instruments for investment purposes, which may expose the funds to a higher degree of risk and can cause investments to experience larger than average price fluctuations. The fund invests in emerging markets which can be more volatile than other more developed markets. The Key Information Document (KID) for Fidelity and non-Fidelity funds is available in English and can be obtained from our website at Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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