Multi-asset: gilts are the safest asset class, right?

Government bonds are the safest asset class, right? Any risk model used to determine your portfolio’s strategic allocation will likely tell you that an allocation to government bonds is the best thing to do if you want to reduce risk. This will likely be based upon the annualised volatility of monthly returns and low levels of correlation with “riskier” assets going back over the past 30 years or so. What it will not tell you, however, is that this coincides with a period in which the UK 10-year government bond yield has fallen from around 16% to around the 2% level prevailing toda...