UK/EUROPE - Unsurprisingly, for the third straight year in a row, fixed income securities proved to be a better investment than shares, according to the Barclays Equity Gilt Study.
The 2003 edition illustrates last year’s disastrous performance of equities, which delivered a negative real total return of 24.5%. In contrast, gilts posted a real return of 6.7%, corporate bonds delivered a 6.6% real return, and index-linked gilts a 5.1% return. Equities have now underperformed gilts over a full 10-year period.
For the future, the study strikes an optimistic note, calculating that financial markets are now discounting a very improbable future of exceptionally slow growth and borderline deflation.
Barclays recommends overweighting equity markets and avoiding bonds for most categories of investor, the exception being mature pension funds.
But, bonds are not all good news for investors, if the decision by credit ratings agencies to look at pension deficits in deciding company ratings is anything to go by.
German industrial conglomerate ThyssenKrupp became the first European company to be downgraded over its pension fund deficit following an earlier warning from Standard & Poor’s.
ThyssenKrupp was lowered to ‘BB+/B’ status from ‘BBB’, rendering it a junk bond.
AXA Investment Managers head of UK fixed income, Denis Gould, said the agency’s actions had “caused significant volatility in bond prices of the issuers involved”, and added: “We also believe they have a duty not to precipitate credit problems for companies.
“Long criticised for being too slow to react, agencies have to be careful not to go too far the other way.
“In particular we would like to see them being very careful with the tone of their statements, especially early in the development of a story when hard facts may be scarce.”
The proposed cold-calling ban may be ineffective if a collaborative regulatory approach between the UK and the European Union (EU) is not maintained post-Brexit, the Pensions Management Institute (PMI) has warned.
Some 56% of defined contribution (DC) asset managers do not believe they will have transaction cost information in time for pension funds' March year-end statements, according to Lane Clark & Peacock (LCP) research.
NEST has appointed Clive Elphick, Martin Turner, Mutaz Qubbaj and Chris Hitchen as trustee members of its reshaped board.
Most people want to avoid investing in projects that contribute to climate change, and would consider moving to another less-exposed provider, according to a survey commissioned by ClientEarth.