Bond-Holders Are Guaranteed to be Hit Hard

14.07.2016 • Gold and Natural Resources

From London Investment Alert (Great Britain)-

Sixty years ago, the financial world changed.
At the Conference of the Association of Superannuation and Pension Funds, the investment manager George Ross Goobey made a speech in which he pointed out that pension funds had a duty, not merely slavishly to match their liabilities with equivalent assets, but to target “the best possible results”.
Given the long-term nature of pension liabilities, such schemes, said Ross Goobey, would likely achieve superior returns not from investing in government bonds – which were the fashionable, conventional choice – but from buying stocks instead.
At the time, UK government bonds offered yields lower than those available in the stockmarket.
When Ross Goobey was appointed as the pension fund manager for Imperial Tobacco in 1947, the yield on UK government bonds, or gilts, was under 3%. Stocks at the time yielded more than 4%, and the British economy was growing strongly.

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