The blue-chip UK stock market index has now entered the formal definition of a bear market, having fallen by more than 20 per cent since its peak last autumn, suggesting that defensive stocks such as utilities are the safest places to be, says F&C Investment Management.

“We have not held house builders, cut most of our exposure to miners and have had very little exposure to sectors such as general retail, travel and leisure,” said Ted Scott, who manages the F&C UK Growth & Income Fund.

Mr Scott has work to do. His fund has underperformed the wider stock market over the past year, falling by 15.62 per cent in the 12 months to the end of May, compared with a -7.12 per cent total return figure for the FTSE All Share, according to Citywire data. It oversees £147.5 million ($290.8 million) of assets.

“We have also reduced our exposure to small caps compared to the fund’s historic profile. On the flip side we have favoured stocks with resilient earnings profiles – which will justifiably be able to command premium ratings - and gone overweight defensive sectors such as utilities, telecoms and tobacco,” he said.

“Over recent months the UK equity market has become increasingly polarised between relative strength in commodities on the one hand and weakness in domestic and cyclical sectors, reflecting the worsening macro backdrop,” Mr Scott said.

However, Mr Scott said that although the FTSE 100 Index of major UK companies was now in a bear market, the UK economy was not yet in a recession, although if it does enter a recession, there are further downside risks for the stock market.