Guido Wrong, shock.
Guido has a great story today. He notes that the Bank of England Pension Fund has moved 70% of it’s assets into inflation linked gilts, a bet on inflation. As he puts it:
Hold on, if deflation is (as the political elite and their client media commentators claim) the big threat, why is the Bank of England’s pension fund betting 3/5 of the £2.2 billion pot on hedging against inflation? This is their personal pension fund. Money talks.
It’s a shame he didn’t read the report itself.
The Trustee received formal notice in February 2007 of the proposed termination of the in-house investment management services provided by the Bank under the existing Investment Management and Custody Agreement.
In other words, the Bank no longer manages it’s own fund.
Also, for a fund that runs a final salary scheme – which is most of the Bank’s pension – index-linked gilts are a decentish way of matching future liabilities.
Pension fund investment is more about asset-liability matching than taking speculative punts.
Hi Duncan
First – wot Chris said. Some funds (notably Boots a few years back) have gone even further than this as a liability matching strategy.
Second – is it anything to do with the maturity of the scheme? In my experience funds tend to up fixed income weighting once the number of pensioner members becomes significant.
Still I think deflation has been over egged and interest rates will have to go up sooner than we would like