Duncan’s Economic Blog

Guido Wrong, shock.

Posted in Uncategorized by duncanseconomicblog on March 31, 2009

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.

3 Responses

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  1. chris said, on March 31, 2009 at 11:35 am

    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.

  2. Tom P said, on March 31, 2009 at 12:34 pm

    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.

  3. newmania said, on April 1, 2009 at 11:53 am

    Still I think deflation has been over egged and interest rates will have to go up sooner than we would like


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