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Defensive Equities

A high-conviction, core equity approach for reducing risk through volatile markets

 

 
 
We’re living in a fast-changing world, fuelled by dramatic geopolitical upheavals, macroeconomic change and technological disruption. With so much uncertainty and market volatility, how can equity investors meet their long-term return goals without taking on too much risk?

Start by rethinking the classic investing maxim that you must take more risk to get more return. It might sound counterintuitive, but a strategy that curbs losses in down markets can still beat the market over time. It’s a different way of defining investment success that leans on downside defences in the pursuit of long-term goals. Here’s how it works.

How Can Investors Avoid Succumbing to Risk Aversion?





We think the key is to build a portfolio that aims to create more consistent return patterns through volatile markets. The goal: to reduce the pain of absolute losses when markets fall while capturing most (but not all) of the market’s gains through a recovery. When a portfolio loses less on the way down, it has much less ground to cover to recoup losses.

Our research suggests that a strategy that seeks to capture 90% of market gains but only 70% of losses can even generate outperformance versus the broad market over the long term.

The value of an investment can go down as well as up and investors may not get back the full amount they invested. Capital is at risk. 
Can Investors Reduce Losses in Downturns and Still Beat the Market?
Line graph with time (years from 1986 to 2025) on the X-axis and dollar value on the Y-axis, comparing the 90/70 Portfolio and MSCI World Index.

Past performance does not guarantee future results. Returns shown are for illustrative purposes only and are not representative of any AB fund. It is not possible to invest in an index.
*Performance calculated by multiplying all positive monthly returns (0% or greater) of the MSCI World Index by 90% and all negative returns (less than 0%) by 70%; shown in logarithmic scale
†Annualized standard deviation
Data from March 31,1986 (inception date of MSCI World Index) through March 31, 2025
Through March 31, 2025
Source: MSCI and AllianceBernstein (AB)

 

Our Recipe for Reducing Risk


It’s not easy to build a portfolio that captures upside during rising markets and also mitigates risk during downturns over time. In our experience, the secret to delivering on the 90%/70% potential lies in finding high-quality stocks with stable trading patterns and attractive prices. We call it Quality Stability and Price (QSP).

Our QSP approach helps form an equity allocation that doesn’t only rely on traditional defensive sectors like consumer staples and utilities. Through the QSP lens, we’ve found a diverse universe of lower-risk companies with standout business models across an array of sectors by deploying deep fundamental research and thoughtful stock selection. Exposures are adjusted as insights into risks and opportunities evolve. 

Quality

Companies that typically have high profitability and durable competitive advantages.

Stability

Stocks of lower-risk companies with predictable earnings streams often have steadier trading patterns.

Price

Attractive valuations are essential; overpaying for downside mitigation can be counterproductive.

Overcoming Market Uncertainty

Market volatility can shake the resolve of even the most patient investors. By targeting more consistent return patterns, we aim to bolster investors’ confidence to stay invested through turbulent market episodes. That’s important because it’s hard to time market inflection points—and selling in a down market often means locking in losses and sacrificing gains in a recovery.
 
With an active strategy focused on both up and down markets, our defensive portfolio aims to address constantly evolving risks. From trade wars to technology, investors must constantly be attuned to the evolving forces that affect business outcomes and investment returns.

Our Defensive Core Equity Portfolios

Discover our range of defensive core equity portfolios, which aim to help reduce the impact of market volatility and capture strong long-term return potential amid the powerful challenges and forces of change that are transforming our world.
 
 
Global Equities
AB Low Volatility Equity Portfolio
Fund Page
Emerging Market Equities
AB Emerging Markets Low Volatility Equity Portfolio
Fund Page
US Equities
AB US Low Volatility Equity Portfolio
Fund Page

Some of the principal risks of investing in the Funds include Derivatives risk, Emerging-markets risk, Equity securities risk and Focused portfolio risk. A full explanation of the risks is provided in the Portfolio’s Prospectus. There can be no assurance that any investment objectives will be achieved.

MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.

This is a marketing communication. This information is provided by AllianceBernstein Limited, 60 London Wall, London, EC2M 5SJ. Registered in England, No. 2551144. AllianceBernstein Limited is authorised and regulated in the UK by the Financial Conduct Authority (FCA - Reference Number 147956).  It is provided for informational purposes only and does not constitute investment advice or an invitation to purchase any security or other investment. The views and opinions expressed are based on our internal forecasts and should not be relied upon as an indication of future market performance. The value of investments in any of the Funds can go down as well as up and investors may not get back the full amount invested. Past performance does not guarantee future results. This information is directed at Professional Clients only and is not intended for public use.

© 2025 AllianceBernstein L.P.