A fund designed to add diversification and potentially reduce volatility during challenging market conditions was introduced into our more defensive investment products for eligible customers earlier this year.

The fund, exclusive to Coutts, the bank behind our investment offering, accesses over 15 ‘liquid alternative’ strategies to diversify our customers’ holdings beyond traditional bonds.

It focuses on areas with low sensitivity to traditional stocks and bonds, and aims to generate stable returns regardless of whether those markets rise or fall. Liquid alternative strategies adopt a range of techniques and financial instruments such as short-selling – a strategy that aims to benefit when an asset's price drops.

Coutts set up the fund as part of a strategic relationship with J.P. Morgan Asset Management – a business with 30 years’ experience of this type of investing. It’s been added to Coutts’ Defensive, Cautious and Balanced managed funds.

The value of investments, and the income from them, can go down as well as up and you may not get back what you put in. You should continue to hold cash for your short-term needs.

Fahad Kamal, Chief Investment Officer, Coutts, says: “This is about trying to generate a different, more stable type of return for our clients, helping cushion their investments from the worst of any volatility. While we continue to hold bonds to help diversify our investments, this fund lets us take that diversification to the next level.”    

Fahad says Coutts introduced the fund because, in recent times, stocks and bonds have been more highly correlated to each other than usual.

“Traditionally, investors have been able to use stocks and bonds to off-set one another,” he explains. “Either markets are strong and stocks do well, or times are tougher, central banks cut interest rates, and bonds do well.

“But today we have challenges around high inflation as well as geopolitical issues – challenges that could potentially cause both bonds and stocks to fall at the same time.”

He adds, “Although that’s not something we currently expect, we need to be prepared for the possibility. We need a new buffer, and that's where this fund comes in – something that aims to operate outside the traditional tide of stocks and bonds.”

Contact your Premier team for more information on investing with us.