Focus: Sipps

Sipp investors are not afraid of the big bad bear market and are becoming increasingly adventurous in their investment choices. That is the conclusion of Richard Mattison, business development director of Sipp provider IPS Partnership.

Mr Mattison says the most popular asset classes for around 10 per cent of its 7,000 Sipp clients – with an average pension value of £250,000 – are gold bullion, foreign exchange and hedge funds.

Much has been said about investing in gold and it is a common feature in previous flights to safety, more as a means of preserving, rather than investing, capital. But foreign exchange and hedge funds is just the start of it. Mr Mattison believes disillusionment with ‘traditional’ asset classes – particularly equities – combined with a loss of confidence in, and incentives for, cash deposits, is encouraging long-term investors to consider alternatives.

“In the crisis of 2000, everyone rushed to cash. In the late 1980s, cash was popular because interest rates were so high. Because of the current historic interest rate lows, investors have to look elsewhere. Top IFAs are having to think outside the box. Investors are looking around and thinking, where else can I put my money?” he says.

While Standard Life and Aegon are among the mainstream providers whose clients are remaining on the traditional side of the investment spectrum, some IFAs are reporting an upswing in enquiries about commodity funds, exchange traded funds (ETFs) and exchange traded contracts (ETCs).

Mark Locke, personal finance press manager at Aegon UK, adds: “Many IFAs we have spoken to have suggested commodity funds and ETFs will become increasingly important, so we are watching this market with interest and will take any trends towards these types of assets into account in the development of our Sipp proposition.”

Neil Jamieson, ETF Securities’s senior sales representative for UK and Ireland says at least 30 per cent of enquiries the company receives is from IFAs on behalf of Sipp investors, and this has intensified since the start of this year.

“There is considerable interest from Sipp investors in ETFs and ETCs. They allow Sipp investors to focus on what is essential for long-term investment returns: asset allocation. The breadth of products available gives Sipp investors the ability to achieve asset allocation to commodities, the US market (Russell 1000 and 2000), plus global investment themes (alternative energy, nuclear and water) and global cyclical plays (basic resources, shipping, steel). They are key components in the tool kit for successful pension investing,” he says.

While gold is “an insurance policy at a time of great financial stress” and tends to perform well in a high-inflation environment – which some predict is lurking around the corner – oil is now perceived as excessively cheap in relation to the long-term costs of meeting global demand, Mr Jamieson says.