Why the pension funds debacle is not all Truss and Kwarteng's fault 🔵 Quite apart from what is happening in the UK, government bond yields are rising everywhere ✍️ ipaperviews
looking back over 122 years, and over that period gilts have returned 1.3 per cent in real terms whereas equities have yielded 4.9 per cent. Over the past 50 years it has been 3 per cent and 4.9 per cent, and over the past 10 years, 1 per cent and 4.7 per cent. So to try to increase their returns, the pension funds have used complicated financial tricks, which involve borrowing against the value of their gilt holdings.
Sometimes you come across a bit of research that you want to tuck away and refer back to when the moment comes. There are two such bits referred to above. One is the Bank of America Securities’ paper on global bond markets; the other the Barclays’ work on long-term returns on different investment classes.
This year, as then, the US is the largest economy, but the data will also include China, the second largest, and 10-year yields there have been pretty much flat all year at around 2.75 per cent. So take out China and I suspect that if anything, the dataAlso, since the numbers were end-September and yields have risen further since then, it is quite possible that 2022 will end up even worse than the 1920 crash, making it number three in this troublesome league table.
There is an ever starker comparison to be made. Taking the UK data, if you invested £100 in British equities in 1899 and reinvested all the dividends, you would have a pot of more than £3.4m now in nominal terms, or £35,000 in real terms. But if you invested that £100 in gilts, you would have only £46,000 in nominal terms, or £470 in real terms.
Danmark Seneste Nyt, Danmark Overskrifter
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