Gilts and other high-quality government bonds have traditionally been seen as the safest places to put your cash, but yields on these instruments are so low that investors are guaranteed to lose money in real terms if they hold them. Gold was a popular alternative in the years following the financial crisis, until it lost 13 per cent in a couple of days earlier in the week.
Investors are now being pushed in to riskier assets, not just in search of returns and income, but also to defend their capital.
Equities, traditionally seen as one of the riskiest assets, are now regarded as relative safe havens by some experts thanks to their ability to provide real returns in a period of high inflation, which many fear is on the horizon.
The members of the Jupiter Merlin team told FE Trustnet last week that they had increased their equity exposure to its maximum limit across their multi-billion pound funds to help protect against currency debasement.
Morgan says that managers are being pushed into equities by default.
"A lot of fund managers have said to me: 'I like equities relative to bonds, but it’s not that I like equities much; just more than bonds.'"
"That’s the danger: there doesn’t seem to be any asset class around and equities are almost the least worst out there."
"People are being forced up the risk curve because the risk-free rate on bonds is so low, and the prices on corporate bonds are really very slender in terms of yields. This means that to get a certain level of income, you have to take on more risk."
"That’s a danger, and people need to be aware of the volatility that might bring."
However, Morgan says there are good reasons for the shift into equities and that defensively minded investors should not necessarily be concerned.
"Gilts and bonds are not really safe havens, even though advisers often sell them as that," he continued.
"If interest rates rise then investors in fixed interest could have serious problems."
"There are risks to being in the bond market, so it [being in equities] might be the right choice to make."
"If there’s an issue that means corporate bonds fall, you expect that to have ramifications for equities as well."
Many defensively minded investors will agree with Morgan that government bonds are not necessarily safe.
The massive money-printing programmes embarked on in the developed, indebted world have led to expectations of high inflation, meaning that anything repaid in fiat money will be devalued and potentially represent a capital loss.
Retail investors enthusiastically bought gold as a hedge against this event, but the precious metal is down 22.2 per cent since its peak in September 2011, despite the continuing use of money-printing policies.
"It’s been a real shock because people have been looking to gold almost as an alternative currency and a place to store their wealth should the global economy fall," Morgan said.
"But it’s not as simple as that; it’s really like any other asset and it’s important to be aware at what level you are buying it at."
The Jupiter Merlin funds used to have a large amount in gold, but they have reduced their exposure recently.
"There’s no silver bullet as the struggles of some of the best managers in the business – Jupiter Merlin – show," Morgan said.
"Even they have suffered because of their position in gold, which fell 13 per cent in a couple of days."
Many retail investors use multi-asset funds such as the Jupiter Merlin range as core holdings in their portfolio. These funds give the managers the flexibility to invest across asset classes as they see fit.
Morgan says that investors should closely follow the weightings in such funds, as defensively minded managers may be upping their exposure to equities.
"I think it’s worth keeping an eye on what your funds are doing. You have got to be aware of what to expect."
"Your fund is going to change its asset allocation. Some funds do have a pretty stable asset allocation, however."
"On AXA Framlington Managed Balanced, the asset allocation hasn’t really changed, it’s always been roughly 80 per cent in equities and 20 per cent in bonds and cash."
"Some funds actively move into and out of the different areas and asset classes quite aggressively."
AXA Framlington Managed Balanced, which has four FE Crowns, is a £470m fund siting in the IMA Mixed Investment 40%-85% Shares sector. It is run by Richard Peirson.
The fund is top quartile in its sector over three, five and 10 years, boosted by its high weighting to equities.
It may not be an appropriate choice for investors who are not convinced that equities are safe enough, however.
The Jupiter Merlin Conservative portfolio was launched late last year to serve investors who are wary about raising their exposure to shares.
The £17.7m fund is yielding 3.5 per cent, according to data from FE Analytics.
It has beaten the average fund in the IMA Mixed Investment 0%-35% Shares sector since launch, with returns of 7.37 per cent.
Performance of fund vs sector since launch
Source: FE Analytics
The fund has just 15.6 per cent in UK equities but also has equity exposure outside the UK through the Morgan Stanley Global Brands, M&G Global Dividend and Newton Asian Income funds.
The managers, all three of whom are rated as FE Alpha Managers, are holding on to their position in a physical gold ETF.
The fund is available with a minimum initial investment of £500 and has ongoing charges of 2 per cent.
AXA Framlington Managed Balanced requires a £1,000 initial investment and has ongoing charges of just 1.27 per cent.