Your current location:
Investments with MPFS Ltd
It has been a rough ride on the stock market recently. It is always a bit of a roller coaster. But, as I write this, it seems more like a “Big Dipper” than a “Stairway to Heaven”!
It is always difficult to predict where the market is going – you could make a fortune with that knowledge. But we have definitely moved into a period of high volatility – that is, the day-to-day swings in the market are much higher than usual. High volatility means high risk, so investors want to be compensated with higher returns. In the short term, this drives down prices.
But there are other factors behind falling prices – in particular, recession in the USA and continuing issues in the banking sector – and the property market is also suffering.
Institutional investors – pension and life insurance funds – tend to spread their assets to reduce risk. At MPFS, we are no exception, and we hold as much in government bonds as we do in UK equities. But we also look further afield to spread our assets – into commercial property and overseas markets.
Like many other institutions, we are now moving into “Hedge Funds”. These funds use various strategies to beat returns on cash, but with much lower volatility than equities. They hedge away the downside risks and expect to achieve positive returns year on year – hence, they are also known as “Absolute Return Funds”. By investing in funds of hedge funds, we further spread the risks. Hedge funds are only available for institutions and wealthy investors, but our with-profits fund is available to investors small and large alike.
Even with our investments spread, we still have good years and not-so-good years. Like most with-profits fund, we aim to smooth the investment returns to our members, rather than passing on the full impact of the market’s ups and downs in one go.
We believe that there is a good future for with-profits funds in the mutual sector, where there are no shareholders to satisfy. The sector may not currently be in fashion. It is also more tightly regulated than ever. But no-one has come up with a better way to turn that roller coaster into a “Stairway to Heaven”.
Stuart Bell
Chief Executive at Metropolitan Police Friendly Society (MPFS)
MPFS
