Defensive moves

We live in strange and unprecedented times. It is natural, therefore, for investors to target sectors and assets that provide high-certainty, low-volatility income streams. But is there a danger that many of today’s “safe” investments — by virtue of their very popularity — will become tomorrow’s risk-laden allocations?

Pricing pressure created by a sector’s popularity is a historically-proven inflection point in an asset class’ trajectory.

Food-anchored neighbourhood retail or hotels, to take just two cases, have shown an attractive return premium, when compared to the standard asset classes of offices, shopping centres or residential, for long periods of time. These structural spreads dropped somewhat, however, once investors shifted focus into these areas. Therefore, the overall risks for these asset classes, due to higher pricing, became bigger over time, although they also became more liquid as well.

This could soon happen in some logistics m