Who I am
When I started working in the private client investment management industry back in 1994, a typical balanced portfolio comprised circa 60% in equities or equity-based funds, 30% in Gilts or other fixed income securities and 10% in cash. UK interest rates were between 5% and 6%.
What followed saw a downward trend in UK interest rates that lasted for 22 years. Investing in UK Government Gilts, and other fixed interest rate securities, was generally a profitable thing to do over this period because when interest rates fall the value of the income stream from such bonds becomes more valuable. The first 0.25% rise in UK interest rates occurred in November 2017. It was followed by a widely predicted further rise of 0.25% in July 2018. Most commentators believe this gradual upward trend is set to continue for many years.
Investment portfolio construction has come a long way since I first started working in the City but what are the implications for investment portfolios of rising interest rates? This is just one of the issues managers need to address today and you should be raising with them.
Private Client Tax Partner,
KPMG 2002 – 2017
EY 1998 – June 2018