The big four banks, Telstra, and AREITs have traditionally formed the backbone of a defensive equities portfolio, but Aaron Binsted, Portfolio Manager at Lazard Asset Management, thinks there are better opportunities elsewhere. In fact, they own neither the big banks nor Telstra in the Defensive Australian Equity Fund. He also singles out AREITs, which he says are facing several headwinds, including years of cap-rate compression, high payout ratios, and structural shifts in sub-sectors such as retail REITs.
“The payout ratios have crept up over time, they’re now at over 90% payout of both earnings and FFO for REITs, which is at the higher end of historical ranges. People should question how much dividend growth they’ll get out of those in future.”
In the full video below, he outlines an ‘out of the box’ defensive stock that does meet his standards.
Defence is the best form of attack
Aaron's Fund has historically provided capital growth and income that is consistent with the Index with less than half the drawdown, compared to the Index in negative markets. Fund out more here.
Have you considered publishing the transcript for the interview along with the view for those who are hearing impaired?