One of the toughest challenges for allocators last year was to create a portfolio for clients who were of a cautious disposition, at a time when bonds of almost every kind were showing a negative return. 

But that particular dilemma became a little less onerous in the fourth quarter, as bond prices edged upwards as investors began to prioritise protection from recession, rather than inflation.  

And that’s reflected in our Asset Allocator Cautious data base, with allocations to fixed income funds rising from 47 per cent to 52 per cent in the final quarter of 2022. 

That compares with a rise from 24 to 26 per cent in the Balanced portfolios and 33 per cent from 31 per cent in the Income portfolios we monitor, even as yields rose. 

And while all categories showed some increase, it was to government bonds that the bulk of the extra capital in the Cautious portfolios went, as the average allocation rose from 11 to 13 per cent in the three-month period. 

There is an unusually large dispersion between allocators here, with Invesco having 75 per cent of their cautious portfolio in bonds of some kind or another, while M&G Wealth are on 73 per cent.

At the other end of the distribution, Close Brothers and Liontrust having just 28 per cent each in bonds of any kind.