With this in mind, FE Trustnet takes a look at four investment trusts that are suited to investors who believe there are further shocks to come.
Personal Assets Trust
Wayne Evans, financial planner at Heron House Financial Management, says the four crown-rated Personal Assets Trusts is ideal for cautious investors because it prioritises capital preservation ahead of growth, which is demonstrated by its consistent performance.
The trust rarely shoots the lights out, but does not fall by much during crashes either.
Sebastian Lyon’s (pictured) trust sits in the IT Global Growth sector. It has delivered 135.69 per cent over 10 years, underperforming the FTSE All Share, which made 164.03 per cent over the period.
However, the trust protected significantly better on the downside when the market crashed in 2008, losing only 3.24 per cent while the sector and index were both down by approximately 30 per cent, according to FE Analytics.
As a result, the trust’s five-year numbers are well ahead of those of its peers.
It has made 53.02 per cent over this time while the sector and index are up 30.74 per cent 33.29 per cent respectively.
Performance of trust vs sector and index over 5yrs
Source: FE Analytics
According to the AIC, the trust is trading on a premium of 1 per cent and is not geared.
"It has a good mix of quality companies both in the UK and overseas, inflation-proof bonds and a large exposure to both physical gold and gold mining shares," Evans said.
"It will underperform in strongly rising markets, which we have experienced of late, but is a good defensive core holding in more uncertain times. It has an excellent long-term track record."
Evans adds that Lyon has a good and deserved reputation of managing more defensive funds.
The trust’s largest position – 13.2 per cent – is in gold bullion, while the remainder of its top-10 holdings are blue chips such as British American Tobacco, Microsoft and Coca-Cola.
The trust has an ongoing charges figure of 1.01 per cent and no performance fee.
RIT Capital Partners
Jason Hollands, managing director of business and communications at Bestinvest, says investors who want to put asset allocation decisions in the hands of an expert should turn to RIT Capital.
"For a more cautious investor looking for a broad global exposure across listed equities, private equity, real assets and currencies, we like RIT Capital Partners as a one-stop shop."
"The trust provides shareholders with a good spread across geographies and currencies, is long-term in its investment approach and does not flit around with fashion."
The trust has outperformed the FTSE All Share over 10 years, picking up 228.57 per cent over the period. It has fallen behind its IT Global Growth sector over this time, however.
While the trust lost more than the Personal Assets Trust in 2008, it lost less than half what the sector and index did that year and has retained positive performance since.
The trust’s defensive nature means it lags behind in rising markets and it lost 5.37 per cent in 2012.
According to the AIC, it is trading on a discount of 9.5 per cent, with 2 per cent gearing.
"The trust combines both in-house managed sub-portfolios and a number of high-quality external asset managers, traditional and absolute return, which are not generally available directly to most private investors," Hollands said.
Among the trust’s top holdings are the soft-closed Findlay Park American fund, Norwegian oil and gas company Agora and niche Japan investment manager Morant Wright.
"The board, chaired by Lord Rothschild, has also made a number of interesting private equity investments both directly, such as US cloud technology firm Dropbox, and via specialist funds," Hollands added.
The trust has an ongoing charges figure of 1.29 per cent excluding performance fee.
Finsbury Growth & Income
For more cautious investors who want to add a shot of growth to a steady income stream, Francis Klonowski recommends the five crown-rated Finsbury Growth & Income trust.
Klonowski, financial planner at Klonowski and Co, says the trust aims to generate growth above the FTSE 100 through investing in UK-listed companies.
"[It is] an aim it has achieved by a considerable margin over five and 10 years," he said.
The £278.1m trust is top quartile over one, three, five and 10 years, outperforming both the IT UK Growth & Income sector and the FTSE All Share significantly over each period.
Over 10 years the trust has picked up 422.22 per cent, while the sector and index are up 191.49 per cent 164.83 per cent respectively.
Performance of trust vs sector and index over 10yrs
Source: FE Analytics
The trust is yielding 2.21 per cent and is currently geared at 4 per cent.
It is headed up by FE Alpha Manager Nick Train.
"The trust has a concentrated portfolio of around 30 stocks, with a low turnover – which helps to reduce costs. Ongoing charges are 0.94 per cent per annum. It currently trades at par to net asset value, but this shouldn’t deter investors from such a well-run trust," Klonowski added.
The trust has an ongoing charges figure of 0.94 per cent.
HICL Infrastructure
"HICL predominantly invests in PFI (private finance initiative) and similar infrastructure projects, the majority of which are in their operational phase, rather than in construction/development," said John Dance, investment manager at Vertem Asset Management.
"It offers an attractive yield of roughly 5.5 per cent and its income is relatively stable due to long-term contracts with local authorities, government departments and similar," Dance said.
The five crown-rated trust is currently yielding 5.46 per cent and has delivered strong returns over one, three and five years.
Since launch in March 2006, the trust has made 72.04 per cent, outperforming the IT Infrastructure sector, which gained a mere 3.58 per cent.
Although the trust has no specified benchmark, as a basis of comparison, the FTSE All Share only made 39.67 per cent over the period, and with more volatility.
Performance of trust vs sector and index since launch
Source: FE Analytics
The trust is trading on a premium of 7.2 per cent and is not geared.
"The capital value of assets and therefore its NAV tends to be fairly stable, which suits a cautious investor, and as the terms of its leases tend to be inflation-linked, there is a catalyst for both capital growth and increasing income from the trust for shareholders," Dance said.
"This could be particularly relevant if central banks and the Bank of England in particular allow inflation to rise as a means of generating nominal GDP growth and economic activity."
The trust has an ongoing charges figure of 1.33 per cent.