Trustnet Magazine 89 November 2022 | Page 28

YOUR PORTFOLIO Cash around , but in the first 15 of the past 30 years , returns on cash savings were significantly higher than inflation . This all changed during the financial crisis , since when the opposite has been the case . Eling notes that while the headline savings rate has superficially increased this year , the gulf between the consumer price index and the Bank of England ’ s base rate means “ cash is decaying at an alarming rate ”. “ In other words , ‘ the cost of cash ’ is its highest for decades ,” he says .
Left behind Just as cash can ’ t get round the inflation problem , it also can ’ t get round the market-timing problem . The long-term return of stock markets is vastly superior to that of cash . £ 10,000 held in cash over 30 years would now be worth £ 24,912.10 ; that same amount invested in an MSCI World tracker would now be worth £ 120,159.12 . The outlook for financial markets looks gloomy , but it also looked gloomy in the midst of the pandemic in March 2020 – the point at which the market turned . It also looked bleak in March 2009 , just months

Against the crowd

While many investors think we may be approaching the bottom of the market , Ruffer Investment Company has the highest weighting to cash or cash-like assets in its history . Manager Duncan MacInnes says that while there has been a painful repricing of risk assets this year , now he fears something worse : “ A dash to cash , but a disorderly one , where investors sell what they can , not what they want to . The liability driven investment ( LDI ) panic was the template .”
MacInnes adds that the return on cash isn ’ t the yield it gives you , but what you can earn by being able to buy distressed or dislocated assets .
“ At the end of September , we were buying long-dated index-linked gilts at extraordinarily distressed prices , just before the Bank of England stepped in to restore order ,” he explains . “ These gilts rallied 115 % on the day . This was an opportunity that lasted not weeks , or days , but hours .”
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