Bond markets were forced to shut down in the backdrop of the worldwide financial crisis. After becoming temporarily dormant in last quarter of 2008, they revived in 2009 and since then they have been concentrating specifically on the top-notch organizations (Indepen, 2009). In order to improve the local as well as the collective global economy by stimulating fresh investments, central banks across the globe have been maintaining low-interest rates. It is pretty worthwhile to note in this context that high inflation rates coupled with low rates of interest have brought down the actual interest rate which is again reflected through returns paid by the bond.
Low rates of interest have affected the appeal of bonds as instruments of long-term investment and the scenario is not expected to improve soon. According to the chief of the central bank of UK, the increase in inflation is an impermanent phenomenon (King, 2008). Given the tensions that were created by the recession, it may be interpreted from this optimistic statement that interest rates are not likely to be hiked in the UK in the near future (Yahoo Finance, 2010).
Though there are chances of recovery, the fact is that the UK is still grappled by the recession. In the property sector prices have risen negligibly and in low volumes, and thus recovery has not been manifested yet (This is Money, 2010). The housing sector has slumped by 20% as compared to the 2007 figures and recovery is expected to be time-consuming (Walayat, 2009). Morris Capital is an English charitable fund which offers an investment medium with the aim to finance educational pursuits. Investing members may withdraw their funds only after a span of five years.
The asset allocation of Morris is spread over various instruments such as equity, bonds, and commercial property. The allocation structure is appended below. Asset allocation is formulated on the basis of portfolio management and is influenced by the fund’ s financial objectives as well as risk tolerance.
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