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The relevance of gold as a strategic asset - UK edition

2021-02-26T14:58:00

Institutional investors5 have embraced alternatives to traditional investments such as equities and bonds in pursuit of diversification and higher risk-adjusted returns. The share of non-traditional assets, such as hedge funds, private equity funds or commodities, among global pension funds increased from 7% in 1998 to 23% in 2019 – this figure is 30% in the US.6

Gold allocations have been recipients of this shift. Investors increasingly recognise gold as a mainstream investment; global investment demand has grown by an average of 15% per year since 2001 and the gold price has increased almost eight-fold over the same period.7

Our analysis illustrates that adding between 5% and 13% in gold to a hypothetical UK pension fund average portfolio over the past decade would have resulted in higher risk- adjusted returns.8

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