Strategy

A Shift in the Role of Cash

For much of the past decade, cash played a limited role in investment portfolios. With interest rates near historic lows, holding cash often meant accepting negligible returns while inflation steadily eroded purchasing power. The prevailing logic was simple: stay invested, seek yield elsewhere, and minimise idle capital.

However, the UK’s higher interest rate environment has disrupted that dynamic. With savings accounts, loans from companies like Pounds to Pocket, money market funds, and short-term fixed products now offering materially improved returns, cash is no longer just a defensive asset—it has become a viable component of portfolio strategy. As a result, investors are reassessing how much liquidity they hold and what role it should play.

The Impact of Rising Interest Rates

The Bank of England’s tightening cycle has had a direct and immediate effect on cash yields. Savings accounts that once offered fractions of …