19th October 2021

High rates of inflation demand a real asset-led approach to wealth management says Mike Deverell of Equilibrium

Governer of the Bank of England Andrew Bailey has warned that the Bank of England will have to act over rising inflation, suggesting that UK interest rates are rising soon. This is following Paris-based policy forum, the OECD, warning that higher commodity and shipping costs are pushing up inflation in the G20 group, and that these higher levels of inflation are likely to last for at least two years.

Financial planning and wealth management firm, Equilibrium, says that this is a result of deep interconnectivity within the economy, and that long-term high inflation rates demand an approach to wealth management that prioritises real assets, over fixed-interest bonds and savings, to minimise the effects of inflation on wealth.

Mike Deverell, Partner and Investment Manager, at Equilibrium, comments “The extent of interconnectivity in the economy is often only really brought to light when things start to go wrong. Currently, the UK is facing a gas shortage, which has knock-on effects on the food and beverages industry, medicine and health care and energy sectors. In addition, supply chain issues and staffing shortages are ongoing, due to Covid and Brexit.

Longer term, we expect inflation to be somewhat lower, but it will be higher for the next six months at least and could surprise a few people. This of course, has implications within financial planning. Higher levels of inflation demand increased inflation protection within portfolios, reducing exposure to fixed interest bonds and increasing real assets, such as property and infrastructure, as well as absolute return strategies, such as short-selling, options and unconventional assets.”