Four Ways Portfolios are Responding to Market Volatility

Instead of attempting to predict market volatility, there is a growing shift toward designing portfolios built to absorb it. By combining core building blocks with thoughtful diversifiers, advisers can position client portfolios to weather market noise rather than reacting to it.

The following four strategies demonstrate how portfolios can remain resilient using core Kernel funds alongside disciplined satellite exposures to further enhance diversification.

In today’s market, a relatively small group of global firms is driving a meaningful share of earnings growth. The risk for many "diversified" portfolios is either unintentionally under-owning these leaders or attempting to access them through individual stock picking, which introduces unnecessary single-name risk.

An allocation to the Kernel Global 100 Fund offers efficient access to these established global leaders through a diversified basket, removing the need to pick individual winners. When paired with more defensive exposures, such as quality income, real assets, or high-quality dividends - this approach helps balance a portfolio’s overall volatility profile while keeping long-term growth potential intact.

Introducing global infrastructure, via the Kernel Global Infrastructure Fund can serve as a core component of a well diversified portfolio, providing access to essential assets such as utilities, transport, and digital networks. With a current yield* of 3.75% vs Cash 2.97% , infrastructure offers a differentiated income stream with potential for capital growth.

It's defensive characteristics and relatively stable cashflows can help support portfolio resilience during periods of volatility, while also diversifying away from the most concentrated sectors of the global market. For pre-retirees and income-oriented clients, this supports yield objectives while improving the defensive "feel" of a balanced portfolio.

In choppier markets, investors naturally become more selective. The focus shifts from "dividend yield at any price" to sustainable dividends supported by resilient earnings. Strategies that emphasise a long history of dividend growth act as a practical quality screen, as these companies typically possess stronger balance sheets and more disciplined capital allocation.

The Kernel Dividend Aristocrats Fund introduces a quality-income tilt within growth-oriented portfolios. This is particularly effective for clients who want equity upside but prefer a smoother ride through a focus on financial stability.

Thematic allocations like clean energy are often viewed as "story trades," but there is a pragmatic portfolio case for them: return differentiation. Currently, markets are repeatedly repricing long-duration assets, policy expectations, and capex cycles. The Kernel Clean Energy Fund sits at the intersection of all three.

Because its performance drivers can diverge meaningfully from traditional sectors and the largest global index names, it serves as a powerful diversifier. When sized appropriately as a satellite, clean energy can provide a non-correlated growth element, particularly when the rest of the portfolio is dominated by broad global equities.

The end of the tax year is a vital moment to ask: what is actually driving returns, and has the portfolio drifted? If growth leaders or higher-volatility satellites have grown beyond their target weights, rebalancing back toward infrastructure, quality income, or fixed income can reset the risk profile. This ensures the portfolio remains aligned with the client’s long-term plan, rather than the immediate news cycle.

• As at 28 Feb 2026. The Dow Jones Brookfield Global Infrastructure Index and Bloomberg NZBond Bank Bill Index are used as proxies for the Kernel Global Infrastructure and Kernel Cash Plus funds, respectively. Figures represent the Index Dividend Yield compared to the Index Yield to Maturity (YTM) for cash)