What a World Growing Older Fast Means for Investing

Idanna Appio spent 15 years at the Federal Reserve Bank of New York analysing the history of sovereign debt crises. Now, as a fund manager at the $138 billion First Eagle Investments, she’s reached a conclusion: US Treasury bonds are too risky to hold.

The call looks far beyond the timing of much-anticipated Federal Reserve rate cuts. It’s tied to a new era of faster inflation, higher government health spending and bigger deficits. And behind all of that? The fact that the world is getting older, fast, and it’s time to get portfolios ready.

Rather than buying what’s deemed the world’s safest asset to balance out her equity and credit holdings, Appio is adding gold. Yields on long-dated Treasuries just don’t offer enough compensation, she reckons, pointing to the surge in US government borrowing that many fear could precipitate a debt crisis in the coming years.

record debt

Appio’s strategy is to eschew longer-dated bonds, which could take the hardest knock if burgeoning age-related state spending worsens the public debt picture. Other big money managers, including BlackRock Inc., Royal London Asset Management and Germany’s DWS Group, are also looking at ways to invest – and protect — clients’ money in such an environment.