Lord Rothschild: Why I’ve Sold Hundreds of Millions of Pounds Worth of Shares, and Bought Gold
Lord Rothschild, chair of the £3.04 billion Rothschild Investment Trust, has revealed that while he has significantly reduced his exposure to listed shares, he has responded to the prevailing economic uncertainty by buying gold.
In his latest update to shareholders, he said that recent months have seen central bankers continuing what is surely the greatest experiment inc monetary policy in the history of the world. He said they are in uncharted waters, and it is impossible to predict the unintended consequences of low interest rates with some 30% of global government debt at negative yields, combined with QE on a massive scale. In stock market terms, the policy has been successful, with markets near their highs, while volatility has remained low. Nearly all classes of investment have been boosted by the rising monetary tide. Meanwhile, growth remains anemic, with weak demand and deflation.
Lord Rothschild said that the geopolitical situation had deteriorated, with the Brexit looming and the US presidential election in November. The situation in China remains opaque, and slowing economic growth will lead to problems. Conflict in the Middle East continues. In times like these, he said, preservation of capital in real terms is as important an objective as any in the management of a company’s assets.
Sterling exposure was reduced over the period from 34% to approximately 25%. Gold and precious metals were increased to 8%. The Trust’s significant US dollar position has been reduced, as it saw interesting opportunities in other currencies as well as gold, the latter reflecting concerns about monetary policy and ever-declining real yields.