Gold Recognized as Diversification Tool by UK Pension Funds

The UK pension funds no longer consider that bonds, the traditional asset, offer the diversification benefits they once did.

SEATTLE (Scrap Monster): The recent survey carried out by the World Gold Council (WGC) in partnership with Pensions Age among UK pension professionals suggests that strategic gold allocations amongst the UK pension funds have witnessed notable surge. The survey findings reveal that gold is being recognized as a potential diversification tool by pension funds.

The survey indicated that nearly 40% of the respondents hold an allocation to gold. This is significantly higher from the levels of 31% a year before. Also, 39% respondents said that their allocation to gold would likely increase over the next one-year period. Only one-third had expressed willingness to increase gold allocation in the 2021 survey.

The UK pension funds no longer consider that bonds, the traditional asset, offer the diversification benefits they once did. It must be noted that investors had traditionally used government bonds as the primary vehicle to mitigate risks. It is in this backdrop that gold is likely to play a key diversification role in pension fund portfolios. In addition to being an effective and liquid diversifier, gold has the potential to act as an inflation hedge, the survey said.

The survey was conducted in February this year among 88 participating UK master trusts, DC and DB schemes.

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