Something very unusual has happened lately in the fact that what would normally consider to be “safer haven” investments have seen lots of negative fluctuations in value. So, what has been happening?
Following Truss/Kwarteng “mini-budget” and the generally high inflation rates appearing across the world there was a large sell off in (traditionally less volatile assets) like corporate borrowings, UK Gilts (UK Government borrowing) and other fixed interest securities. Under any “normal” circumstances, these assets provide stability to your portfolio however given the sentiment turned negative this led to a major sell-off and in turn reduced the value of existing debt.
Major pension funds (especially those providing final salary benefits) are required to maintain high levels of these “safer” investments to guarantee their members benefits so this was manifested in news coverage with horror stories of pensions funds possibly going bust. Pension schemes are always covered by either the FSCS or the PPF and therefore members needn’t worry too much but it is something all investors and pension scheme holders need to be aware of.
We have already seen some improvement to their valuations, given the recent “slightly more aggressive” budget announced by Mr Hunt but it will probably take some time to fully recover.
See our guide to “attitude to risk” here: https://financialfortress.co.uk/guide-to-your-attitude-to-risk/
Watch our video on “attitude to risk” here: https://financialfortress.co.uk/the-financial-fortress-guide-to-attitude-to-risk/