Dull and reliable investments

By Staci West on 11 June 2025 in Equities, Fixed income

Excitement has its place when you’re investing. It’s always nice to participate in some hot new theme that promises to make you multiple times your money. However, boring and predictable also has an important role. After the recent rollercoaster in stock and bond markets since the start of the year, dull investments may have some appeal. 

What are the characteristics of a “dull” investment? 

Certainly, it shouldn’t have too many surprises. That, unfortunately, is the trouble with the US stock market at the moment. Yes, AI may prove as revolutionary as hoped, justifying the eye-watering valuations for many of the US technology stocks. Donald Trump’s eccentric economic policy may prove just the tonic to address the US deficit and resolve its structural imbalances. But even if this is the case (unlikely), does it justify the 70% allocation to the US seen in the MSCI World index? 

Two “dull” equities

A fund such as the Orbis Global Cautious fund is a good ‘boring’ option to balance out this US exposure. It has made a positive return in each of the past five calendar years*. It has just over 50% in fixed income and 40% in equities; within its equity weighting – and unusually for a global fund – it has just 11% in the US*. Manager Alec Cutler is also short the US dollar*. 

Alec says: “The US stock market is really expensive. We start with valuation, which has been an uncool thing to do, but we think it may be coming back into relevance. The excuse for a long time was that interest rates were going down. But now the 10-year yield is 4.5% and the P/Es are still high. There’s no excuse except for the US being exceptional, and we think that exceptionalism comes from massive stimulus and liquidity, and government debt going through the roof. There is a decent shot that the tide flows out.” He points out that it’s not just that stock markets have to drop. If the currency goes down, non-US investors will lose out.

His focus on valuation and natural contrarianism means that he will naturally be invested in ‘unsexy’ parts of the market and tends to avoid the emotional rollercoaster of more fashionable areas. He was early into the defence trade, for example. At the moment, this includes companies such as Siemens and Kinder Morgan*. He also holds some gold, some Icelandic government bonds and UK gilts*. 

Contrarianism is also evident in the SVS RM Defensive Capital fund. Its eclectic portfolio includes investment trusts, structured notes, government securities, corporate and convertible bonds, preference shares plus other collective investment schemes and exchange traded funds**. It describes itself as an ‘all-weather strategy’, with a focus on lower volatility and on minimising downside risk.

This fund also tends to have a value bias, avoiding expensive areas of the market, which makes it another dull but more predictable option. The fund allocates flexibly across three main areas. Its largest allocation is towards capital preservation and income investments. In this part of the portfolio, the fund has some convertible corporate bonds, a loan financing fund, plus warehousing group Tritax Eurobox***. The capital growth part of the portfolio has a range of derivatives, plus the Chrysalis investment trust***. The discounted growth assets segment includes a number of investment companies on deep discounts being wound up and returning cash at NAV, such as Riverstone Energy and Tufton Oceanic***. The fund targets positive absolute returns in any market conditions over rolling three-year periods. It has only had one down year in the past five, dropping 5.5% in 2023**. 

Two “dull” fixed income 

‘Dull’ may also mean paying attention to long-term risk factors, such as resource scarcity or social responsibility. The Rathbone Greenbank Global Sustainable Bond fund operates like a normal strategic bond fund, blending high yield, government and investment grade bonds issued by companies, governments, charities and non-governmental organisations, while also, “avoiding investing in activities that make the planet or its inhabitants worse off, and actively support those projects that are doing good in the world.” That may sound a little worthy, but is an effective way to manage long-term risks. 

The fund is run by experienced fund manager Bryn Jones and his team. It only launched in 2023, so hasn’t yet been tested in a variety of environments. Nevertheless, its sister funds – including the Elite Rated Rathbone Ethical Bond fund – have a good track record in difficult market conditions and the sustainable overlay should see it avoid more difficult parts of the bond market. 

M&G’s Richard Woolnough can also lay claim to being a safe pair of hands in a variety of environments. He has been at the helm of the M&G Optimal Income fund since 2006, and has delivered double the return of the wider IA Sterling Strategic bond sector over the past five years^. The fund has shrunk in size from its peak, and is now a more manageable £1.36bn. 

This is a ‘go anywhere’ fund, so gives the most flexibility. Richard has shown himself to be comfortable going against the prevailing market view, most memorably during the global financial crisis, when he divested of bank bonds before problems hit. He recently compared the current environment to that crisis with high rates, economic concerns, worries over inflation and tight corporate bond spreads. That means he has a relatively high allocation to government bonds. 

None of these investments will suit a thrill-seeker. For them, there are plenty of AI, innovation and technology-focused funds to choose from. These funds should be the portfolio ballasts, where investors don’t have to worry too much about the latest social media missive from the White House. 

*Source: fund factsheet, 31 May 2025

**Source: fund factsheet, 30 April 2025

***Source: fund presentation, Q4 2024

^Source: FE fundinfo, 9 June 2020 to 9 June 2025