Why have my funds dropped in value?

Your investments and pensions are typically invested in company shares (equities) and fixed income assets (government and corporate bonds). In general, company shares are held to provide capital growth in your investments over the longer term. It’s important to note that the performance of company shares is linked to the performance of the stock market which can go through periods of volatility. This can cause the overall value of your funds to drop in the short term.

Fixed income assets include government and corporate bonds, which are loans issued by the government (government bonds) and loans issued by companies (corporate bonds) to raise financing in the financial markets. Bonds carry interest rate risk which means that the price of these assets will fall when interest rates go up. Bonds have traditionally shown lower levels of volatility than company shares.