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The Case for Fund of Funds

Protecting and growing one's wealth in good times is a challenging undertaking. Hit a bear market with all its inherent volatility and risks, and managing one's portfolio becomes a nail-biting task.

Ajay Kapur, global strategist at Mirae Asset Securities, shares his views on how to invest in the current global downturn. He recommends keeping half of one's portfolio in cash, and 5-10 percent in physical gold. He says it is always prudent to hold physical gold such as bars, coins and jewellery, not for capital gain but for security.

As for the remainder of the portfolio, Ajay suggests leaving it to a fund of funds - a form of investment that holds a portfolio of other investment funds - to protect against downside risks, despite the fees involved.

"It is an unfashionable area of the market as they charge fees but they provide an economic service," explains Ajay on CNBC Asia Pacific's "Protect Your Wealth". "They provide diversification across different asset classes and strategies, and also handpicked hedgefund managers. If they do theirs jobs correctly, they are also doing due diligence against the Madoff-type of blowout."

He says that such funds tend not to match up when equities take off. But should the market collapse like last year, the funds provide some sort of cushion as they generally do not perform as badly as equities.

And if you prefer to manage your own portfolio and to enter the equity market, Ajay suggests finding investment themes that allow you to play and hedge yourself.

Ajay also favors infrastructure plays as he believes the next fews years will be largely driven by government spending and consumption.

Comments? Questions? Send them in here.


Catch "Protect Your Wealth" on CNBC's Asia Pacific network every Tuesday on "CNBC's Cash Flow," Wednesday on "Asia Squawk Box" and Thursday on "Capital Connection."