Net investment in gilts in Q4 of last year was £8bn, significantly higher than the five-year quarterly average of £2bn.
However, short-term assets (those that can be liquidated within a year) suffered and reported a total net disinvestment of £5bn.
It was the fourth consecutive year of annual net investment for gilts following years of net disinvestment in 2011 and 2012 which, “would seem to suggest that some market participants have been switching back to gilts in recent years, possibly in an attempt to avoid the relative volatility of equity markets”, the ONS said.
A longer-term comparison of investment into short-term assets finds there was net disinvestment in 2008, 2009 and 2010 but positive investment in subsequent years, something the ONS said “highlights how institutions, taking account of the prevailing economic climate, have chosen to restructure their investment portfolios”.
Overall, the ONS’s research into investment by pension funds, insurance companies and trusts found Q4 of 2016 ended with a total net disinvestment of £18bn as institutions disposed of more assets than they acquired.
It is only the sixth time total investment in one quarter turned negative since the ONS began collating data in 1987.
In its research, the ONS said: “Net disinvestment at a total level is unusual and may be influenced by changes in investor confidence in the economic environment.”
The disinvestment was due mostly to withdrawals from overseas securities, UK corporate securities and short-term assets.
UK ordinary shares also suffered and reported a fourth consecutive quarter of disinvestment at the end of 2016, pulling down the annual estimate of net disinvestment in overseas securities to £45bn, the largest in 30 years.
