In this latest blog from FundCalibre, Managing Director Darius McDermott, looks at some investments with caution in mind, that have shown they can stomach volatility and still grind out a return for investors.
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
The above is a quote from the late American economist Paul Samuelson who was trying to highlight that successful investing requires patience, discipline and a long-term perspective rather than chasing exciting, high-risk, short-term gains. For investors – boring can be brilliant!
The past 12 months have shown us that markets are robust and resilient and can carry on grinding higher in the face of uncertainty. It is a timely reminder that the biggest mistake you can really make is not being invested at all.
Few would’ve predicted global equities would return almost 13% in 2025* and even fewer would’ve been positive on the prospect for markets amidst the uncertainty of Liberation Day in early April last year, when the president pulled out his super-sized Bingo board of tariffs.
But as those tariffs were firstly delayed and then negotiated to much lower levels than originally indicated, markets reacted and motored on, with global equities rising some 30% between April and December 2025**. They seemed to be able to just cut out all the noise and uncertainty.
What I found most pleasing about returns in 2025 is they were not dominated by the AI-led tech companies in the US. The narrowness in market leadership from these tech behemoths, broadened out with the UK, Japan, Europe and emerging markets all producing stronger returns than the world’s largest economy in the past calendar year*.
You were even able to make a decent return in bonds where – despite the tight spreads – the average vehicle probably returned mid to high single digit returns.
But we now live in a world where most markets are either expensive or fairly valued. For example, every major market (bar China) is more expensive than it was five years ago.
Most major markets also look expensive from a number of metrics – the US (22.2x) and Japan (15.9x) are on the expensive end from a price-to-earnings metric, with the likes of Europe and Emerging Markets (14.9x and 13.9x) fairly valued versus other areas of the world***.
In fact most major markets offer little value across most metrics (P/B, EBITDA, dividend yield, cape etc) with the exception being the UK and China, which both have significant sentiment issues hanging over their economies.
Geopolitical volatility has been added to by concerns of an AI-bubble, while gold and silver have both undergone a correction of sorts, following a strong run towards the end of 2025.
If 2025 has shown us one thing, it is that you should be careful about not being invested, stock markets have fallen in the past and will continue to do so in the future, but they have also shown remarkable resiliency and flexibility to recover quickly.
Contrast this with the fact that if you held £100 in cash between 2014 to 2024 you lost over a quarter of your purchasing power due to inflation****.
With this in mind, I thought I’d look at a few investments worth considering should we see a downturn in fortunes in 2026 – these portfolios are designed with caution in mind and have shown they can stomach volatility and still grind out a return for investors.
Capital Gearing Trust
Capital Gearing Trust (CGT) places an emphasis on capital protection, delivering a positive return to investors in 41 of the past 43 years, whilst also substantially outperforming inflation over the long term.
The trust looks to achieve these returns over the long term, through a global portfolio of equities, bonds and commodities, offering both diversification and risk management.
CGT can hold up to 50% in equities, however the team believe the potential returns on US equities are very low (with almost all assets correlated to the world’s largest economy).
As a result, the team currently hold only 24% in equities. By contrast they hold 45% in index linked government bonds^.
Ninety One Diversified Income
Managed by John Stopford and Jason Borbora Sheen, the fund targets a yield of around 4% annually, distributed monthly, by principally investing in fixed income securities and some equity positions.
The portfolio also uses hedging for downside protection, with the fund targeting half the volatility of UK equities. The portfolio has produced solid, single digit returns each year for the past decade, the only exception being a 5.5% loss in 2022^^.
JOHCM Global Opportunities
This is one of the few funds to produce a positive return in each of the past ten calendar years^^ (it has returned 162.2% to investors in the past decade)^^^. Manager Ben Leyland has a strong bias towards larger and medium-sized multi-national businesses in his portfolio, which typically holds 30-40 stocks.
The philosophy of this fund is ‘heads we win, tails we don’t lose too much’. The fund also can, and will, hold large cash positions if valuations are unattractive. The fund currently has only 42% in US equities, with strong positions in Europe (33.5%) including the likes of Germany and France and Japan (9.6%) for diversification purposes^^^^.
Polar Capital Global Insurance
Insurance is more of a diversifier, for example, this fund produced a return of almost 25% during the Anus Horribilis that was 2022 for investors^^. The sector is typically less sensitive to macroeconomic conditions, as well as being less vulnerable to big tech disruptors.
Insurance companies will also tend to be cash generative and pay higher dividends. Polar Capital Global Insurance typically invests in 30-35 companies. Managed by Nick Martin, it has proven its ability to demonstrate alpha in all market conditions, producing a positive return in nine of the past ten calendar years^^.
When assessing individual companies, Nick emphasises underwriting, balance sheet integrity, management and inside ownership. Clearly, exposure is entirely to insurance firms, but the fund rarely invests in life assurers, believing its remit is to provide exposure to companies in the specialist non-life, casualty and risk sectors.
*Source: FE Analytics, total returns in pounds sterling, 31 December 2024 to 31 December 2025
** Source: FE Analytics, figures in pounds sterling, 21 April 2025 to 31 December 2025
***Source: Fidelity International, 22 January 2026
****Source: ONS
^Source: fund factsheet, 31 January 2026
^^Source: FE Analytics, discrete calendar year performance 2015 – 2025
^^^Source: FE Analytics, total returns in pounds sterling, 11 February 2016 to 11 February 2026
^^^^Source: fund factsheet, 31 December 2025
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius’s views are his own and do not constitute financial advice.
Main image: scott-rodgerson-BwMcYuHI9OI-unsplash
