Geopolitical tensions have once again dominated financial markets this year, creating uncertainty and heightened volatility. Despite this challenging environment, the Ancoria Pension Funds have demonstrated resilience, with performance supported by positive equity market returns and prudent tactical positioning.
What Has Happened?
The outbreak of the US-Iran conflict at the end of April and the subsequent disruptions on oil supplies have caused oil prices to rise sharply. With no clear resolution to the conflict in sight, sustained higher energy prices have contributed to rising inflationary pressures.
In response, both the European Central Bank and the US Federal Reserve started raising interest rates and investors are increasingly anticipating further interest rate hikes.
Higher interest rates affect the wider economy, increasing borrowing costs for consumers, businesses and governments. This can reduce household spending, discourage business investment and add pressure to already elevated government debt levels.
Impact on Financial Markets
Bond markets have been particularly affected by rising interest rates. As interest rates rise, existing bonds become less attractive compared to newly issued bonds offering higher yields, causing their prices to fall. Gold has also experienced losses, as it becomes less attractive compared to bonds offering higher interest.
Equity markets, on the other hand, have demonstrated greater resilience. Although stocks initially declined following the outbreak of the conflict, markets subsequently recovered strongly, largely driven by renewed enthusiasm surrounding Artificial Intelligence (AI). However, the rally has lost momentum during the second half of the year, as investors have become increasingly cautious about elevated share prices and
and the substantial investment in AI infrastructure, particularly whether this spending will generate sufficient returns to justify current valuations.
Ancoria Pension Funds
Against this uncertain backdrop, we have maintained a prudent investment approach, with slightly lower allocations to equities and bonds and a correspondingly higher allocation to cash and money market instruments. The Pension
Funds have benefited from the equity market recovery, while reduced exposure to bonds has helped limit losses. Returns have also been supported by interest from cash and money market holdings.
Looking ahead, we remain focused on managing investment risks and maintaining well-diversified portfolios as we navigate the uncertain geopolitical and economic environment.
Asset Allocation at 22nd October 2026
