INVESTMENT SPECIAL: Anything but gilts

In search of the next ‘trade of the decade’

Imagine you were sitting in St Paul’s at the 1981 royal wedding, waiting for the mismatched bridal couple to arrive and idly speculating about the best way to save up for a wedding present for their first-born, a generation hence. The odds are you would not have given much thought to British government stock, or gilts, as the investment of choice.

At the time, gilts had become a pariah of the financial markets, shunned by anyone who had followed their calamitous decline in value over the postwar period. Inflation is the great enemy of bonds, and so great was the loss of faith in UK government debt as a store of value in the face of the country’s continued economic incontinence that in 1981 most issued gilts were trading at 40 per cent or less of their face value. One in-famous issue, undated 2.5