Some wealth managers have upped their allocations to these funds during the first half of the year, perhaps more in hope than expectation that they will shield investors from a bond market tantrum.
These funds spectacularly failed in most cases during the 2008 crisis and there is nothing so far to suggest that they would fare much better generally in the event of a future market crash, although there will no doubt be honourable exceptions.
So what does that leave- throwing most of your pot into cash? This limits the potential for loss of course but makes you virtually nothing, and can lose investors’ money in real terms if inflation gets a bit punchier than the central bankers can manage.
Or gold perhaps? You would need a strong nerve to put a lot of your money into gold at the moment with the price up and down like a yo-yo over the past year.
Instead of spending time and effort trying to convince investors they can offer safe havens for their money, wealth managers may do a greater service to their clients by managing expectations so they are comfortable with the reality that sometimes short term paper losses will happen.
The key for investors is not to find some kind of magic trick to shield investment pots from choppy markets, but to be calm and show patience so that losses are largely confined to paper and are recovered over time.
