Defensive investing in an age of disruption

Traditionally, defensive stocks and sectors are ones that have been able to retain value despite economic upheavals. However, this year has seen significant headwinds for such investments, sparking new debate on what constitutes a defensive investment.

 

Defining defensive stocks

During economic downturns, investors have relied on defensive companies to protect their portfolios. Such companies often display the following characteristics:

Defensive investing

Why invest in defensive equities?

Investing in defensive equities, particularly during times of volatility, can be key to achieving long term investment success.

Based on our analysis shown below using the monthly returns of the MSCI World Index, a hypothetical portfolio that simply matches the index returns during months of positive returns, but captures just 90% of the index’s negative returns, would be able to more than double the returns of the index.

The impact of downside protection on long-term returns

The value of a hypothetical US$10,000 invested at launch of MSCI World

The impact of downside protection on long-termreturns

 

Past results are not a guarantee of future results. For illustrative purposes only. Investors cannot invest directly in an index.
Data as at 31 May 2020. Cumulative returns in USD terms. Sources: MSCI, Capital Group Downside capture measures monthly return during periods of negative market returns, divided by the market return. 
A number below 100% indicates returns above the market.

Where might investors find defensive investments today?

In an age of digital disruption where traditional business models have been upended by digital jumpstarts, companies with defensive attributes might be found in surprising places. Capital Group has identified two broad themes for these new defensive companies:

New technology

which drives client usage and increases total market size

New business models

which drive more stable earnings

Funds that may benefit from disruption

A new perspective on global investing
 

Capital Group New Perspective Fund (LUX)

 
  • Part of a strategy that has invested through five decades of transformational change
  • Identifying global champions of the future
  • An all-weather portfolio
Growth and innovation in an evolving global economy
 

Capital Group New Economy Fund (LUX)

 

  • Capturing tomorrow’s growth with innovation
  • Identifying companies at the forefront of change
  • Part of a strategy that has over 35 years of attractive long-term results

Why Capital Group?

Making your goals a reality since 1931


For more than 85 years, our investors have been our real story – living proof of the difference we strive to make in people’s lives through the work we do. We know that investment is about real people with real financial goals, which is why adhering to a long-term view is one of our core investment beliefs.

 

The Capital SystemSM: Prioritising consistent long-term investment results

Rooted in research: Benefit from decades of deep, fundamental research

Long-term approach: Your long-term interests are our focus

Extensive research capability

Letting the numbers speak for themselves

71 Equity portfolio managers

 

179 Equity analysts

 

US$1.6 T Equity assets under management

 

12 Global research offices

 

28 years Average investment experience of our portfolio managers

Past results are not a guarantee of future results.
Data as at 30 June 2020. Source: Capital Group

More than 85 years of equity investment experience

1. MSCI indices are now maintained by MSCI, Inc
2. American Funds are not registered for sale outside the United States

Extensive global research is the backbone of our system

Fundamental, globally integrated research is crucial for identifying investment opportunities and risks

 

1. Beijing: Dedicated to macroeconomic research. Mumbai: Capital Group International, Inc (CGII) only.
Past results are not a guarantee of future results.
Data as at 30 June 2020. Source: Capital Group

Risk factors you should consider before investing:

  • This material is not intended to provide investment advice or be considered a personal recommendation.
  • The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
  • Past results are not a guarantee of future results.
  • If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease.
  • The Prospectus – together with any locally-required offering documentation – set out risks, which, depending on the fund, may include risks associated with investing in fixed income, derivatives, emerging markets and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.