Gold miners, infrastructure and insurance are among the sectors that investment experts are using for security now that traditionally defensive sectors have rocketed. 
The flight to safety has left many stocks looking overvalued, with some of the ‘safest’ companies now on multiples far exceeding their previous history.
Meanwhile, traditional safe havens such as bonds, which would be held in conjunction with equities for diversification, have soared, leaving behind very low (and in some cases negative) yields.
As the below graph shows, the FTSE 100, which has been the main beneficiary from this flight to safety, has risen 11 per cent so far this year.
Performance of indices in 2016
Source: FE Analytics
Meanwhile, government bonds have risen 11.17 per cent as both asset classes have moved in tandem and put question marks over any diversification benefits.
This has led to a difficult time for cautious investors, with large traditional defensive companies too expensive to invest in, while bonds are also near record highs and yielding very little.
With Donald Trump winning the presidential election in the US, it appears markets are set for more volatility in the near future, with markets around the world expected to react to the vote.
Below, FE Trustnet asks the experts which asset class they would use for protection in the current climate with an example of a fund for each.
Insurance
Premier Asset Management’s Simon Evan-Cook said: “One fund we like that may qualify as an alternative to the classic defensive areas is Polar Capital Global Insurance.”
“With their stocks classed as financials, many investors have shied away from them following the financial crisis, meaning that they are still trading on attractive valuations.”
Insurance remains a divisive sector, with many unwilling to throw their hat into the financial services arena but others are keen on the sector, with FE Alpha Manager Alex Wright noting he thinks the area is attractive at current valuations.
Over the last five years, the global insurance sector has performed very strongly, returning 122.44 per cent to investors, but the £525m Polar Capital Global Insurance has surpassed even that, returning 133.58 per cent over the period.
Performance of indices over 5yrs
Source: FE Analytics
Alec Foster and Nick Martin’s five crown-rated fund looks to make an attractive total return, irrespective of broader economic and financial market conditions, by investing in companies in the international insurance sector.
Evan-Cook said: “As always with us, the key with this fund is that it’s a very well managed active fund. The highly experienced managers are able to pick and choose only those companies that haven’t taken on undue risks.
“This lessens the cyclicality of the portfolio, meaning that the portfolio responds very well in bear markets, while performing fairly well in rising markets too.
Polar Capital Global Insurance has a clean ongoing charges figure (OCF) of 1.40 per cent.
Gold equities
Rob Morgan, pensions and investment analyst at Charles Stanley Direct, says he would look to add gold, a traditional safe haven in times of market volatility.
Many investors add gold as protection to their portfolio and now could be the time to look the asset class, despite a strong rise over the last year.
“I would suggest value investments but actually some of these have been on a good run in recent months. In any case many are in more economically sensitive areas so would wouldn't necessary be defensive even though they are cheap,” he said.
“Therefore a good second line of defence outside of bond and absolute return funds would be gold equities. These would do okay in a more inflationary world and potentially very well in the event of a market panic. BlackRock Gold & General would be my fund choice.”
While gold has returned 44.53 per cent so far this year, gold miners have rebounded even stronger, with the FTSE Gold Mines index rising 121.75 per cent in 2016.
Performance of fund vs benchmark and gold spot price in 2016
Source: FE Analytics
The three crown-rated BlackRock Gold & General, run by Evy Hambro and FE Alpha Manager Tom Holl, has returned 104.16 per cent so far in 2016.
The £1.3bn fund holds a number of large mining companies including Randgold Resources, Newcrest Mining and Goldcorp.
Morgan said: “I would only ever suggest a small percentage in a portfolio, but they could make a worthwhile insurance policy right now.”
BlackRock Gold & General has a 1.17 per cent clean OCF.
Infrastructure
Whitechurch’s Ben Willis suggests investors should look at global infrastructure as a potential haven for investors, with many governments, including the UK and US, likely to use fiscal stimulus to help boost their respective economies.
He said: “Infrastructure assets are generally long-dated assets and so are generally lower beta than broader equity markets and so relatively defensive during periods of equity market weakness.”
He adds that the nature of infrastructure projects, providing vital services needed throughout an economic cycle, makes it a resilient asset class during times of a market downturn.
As well as this, they provide stable income and can even be used as an inflation hedge in certain scenarios, he says.
“Infrastructure assets tend to be cash generative and so tend to produce regular, stable income distributions – an attractive prospect in this lower for longer interest rate environment.
“And even though inflationary pressures are not an immediate concern, revenues from infrastructure assets are often inflation linked either through a regulatory framework or contractual obligations.”