Wealthy investors shun gilts for stocks, property and art Wealthy investors are shunning low-yielding gilts in favour of equities, property and art, adding more risk to their portfolios in search of greater returns. A survey of more than 1,000 Lloyds Private Bank customers found that on average investors had cut holdings of government bonds by 16 per cent since October last year. Over the past year, the participants, who all possess more than £250,000 of investable assets, have instead chosen to boost their investments in collectable items such as art, wine and classic cars which have seen impressive, though occasionally volatile, returns. The Knight Frank Luxury Investment Index, which tracks the value of nine luxury collectable assets, has increased in value by 7 per cent in the past 12 months and 174 per cent in the past 10 years. Equities and property also grew in popularity. Ashish Misra, head of investment policy at Lloyds Bank Private Banking, said the "sell gilts" trade had gone mainstream as investors prepared themselves for possible volatility in the bond market if the Bank of England pulled back from its programme of purchasing bonds, known as quantitative easing. The size of the BoE's asset purchase facility has not been increased since July, and some commentators believe that further purchases are unlikely unless the UK or global economy undergoes serious problems. In May this year, the US central bank's seeming indication that it would taper its monetary stimulus programme sent bond prices falling, although they have recovered a bit. Gilts are traditionally seen as a haven investment, useful for risk-averse investors. But government bonds have been losing investors money in the past year. The average gilt fund has returned -1.8 per cent over the past 12 months according to FT Trustnet. Gary Reynolds, chief investment officer at Courtiers Investment Services, said that the gilt market had been unnerved by mixed signals from central banks about the intentions for the future. Gilts are fixed-term contracts. They give back a promised level of return in the future. But if the market thinks interest rates are going to rise and there will be better returns elsewhere then the prices investors are willing to pay for gilts falls. As anyone who lived through the problems of the 1970s will know, bonds are nowhere near as safe as some people seem to think they are. Big price movements can happen.