Standard Life advises that assets which have increased in value in the last decade – and where there has simultaneously been volatility across other markets – are the top picks.

In a recent note, Standard Life Investments highlights that although it is wise for investors to strive towards building resilient portfolios to reduce risk, full protection is unlikely.

The world economy is characterised by a combination of ultra-low interest rates, sovereign and banking crises, geopolitical events and natural disasters. Being able to estimate risk duration as well as its nature in terms of local or global impact, is highly important.

Therefore, the “magnitude, nature and incidence” of potential threats will determine which is the best safe haven to opt for. In its note Are There Any Safe Havens?, Standard Life advises that selecting assets which have increased in value in the last decade – and where there has simultaneously been volatility across other markets – is the best way of deciding.

Some asset classes have performed strongly due in part to their appeal as safe havens from economic turmoil, most notably gold and the Swiss franc, prompting the Swiss National Bank to cap the currency’s strength and protect exporters. The firm said that prices have risen so high that they will no longer attract investors in the absence of very strong performance.

Government bonds served as a safe haven in the past but the sovereign debt position of countries in, say, the eurozone has cast a shadow over this asset class.

“Investors face a dilemma and their focus now vacillates between securing income and preserving capital. While there are obvious areas of concern and even specific risks, there is no agreement on what the main dangers actually are,” said Frances Hudson, global thematic strategist at the firm.

“If deflation, debt and demographics are the major long-term threats, cash may be the answer. If inflation is the more pressing concern, granular analysis should help to narrow down the type and impact of price rises and determine appropriate portfolio adjustments. Real assets, equities and inflation-linked bonds are still primary havens, although it would be prudent to avoid assets that are vulnerable to policy or regulatory change,” she said.

Hudson concluded that diversification is “increasingly hard to come by” due to the vulnerability of assets which are linked through credit channels not being immediately transparent.

“Investors should use scenarios and construct portfolios that are resilient to an array of different risks but they are unlikely to be able to protect themselves completely,” she said.