Fund Managers Boost Stress Testing and Defensive Bets
Managers are shifting toward defensive stocks to protect portfolios against rising market volatility and uncertainty.
Updated on Oct. 28, 2026 in Investing
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Nearly 9 out of 10 global fund management firms have increased their investment in stress testing over the past year to navigate market turbulence. This shift highlights a broader move by institutions to protect assets against ongoing volatility, geopolitical instability, and liquidity constraints.
Why it matters
As professional money managers prioritize defensive strategies, individual investors should understand that the tools used to model portfolio risks are becoming more costly and complex. This trend reflects a institutional pivot toward safeguarding capital in an era defined by reduced dealer capacity and global uncertainty.
A recent survey of fund managers across the U.S., Europe, and Asia-Pacific found that 88% increased their stress testing expenditure over the past year. Looking ahead, 54% of managers plan to shift toward defensive stocks while 56% intend to deploy protective put options within the next 12 months.
The details
Asset managers are increasingly using advanced stress testing and scenario modeling to access consolidated investment data. This process involves simulating how portfolios respond to market shocks, allowing firms to react more effectively to volatility and geopolitical risk. By integrating these quantitative models, managers aim to identify potential weaknesses in their holdings, which often leads to defensive repositioning within their funds.
Timeline
Over the past year, 88% of executives increased spending on stress testing.
Over the next 12 months, 49% of managers plan to employ enhanced risk modeling.
Over the next 12 months, 54% of managers expect to increase focus on defensive stocks.
Over the next 12 months, 56% of managers plan to put protective puts in place.
Money Landscape
The focus on advanced risk modeling follows the documented trend of reduced dealer balance sheet capacity and persistent geopolitical uncertainty. These institutional shifts indicate a departure from growth-oriented strategies toward structures that prioritize capital preservation during market shocks.
Individual investors should be aware that their funds may rotate into defensive assets or incorporate hedging tools like protective puts more frequently in the coming year. Review your portfolio's exposure and discuss with a qualified financial professional whether your current asset allocation aligns with your risk tolerance.
The takeaway
The rise in defensive positioning reflects a broader institutional consensus that market volatility remains a significant long-term risk. Individuals should review their investment statements to see if their holdings have changed exposure toward defensive sectors or hedging strategies.
Further reading
To learn more about how shifts in institutional risk management might affect your long-term goals, visit our guide on Investing.
Source note: This article includes information reported by Supply and Demand Chain Executive.
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