by Kyle Caldwell from interactive investor, 10th October 2023:
The 15-year anniversary of the collapse of Lehman Brothers, which sent shockwaves through global stock markets, recently passed.
Prior to the largest bankruptcy in US history came the credit crunch. This put paid to over-borrowed banks such as Northern Rock. Then came the full-blown banking crisis in which Lehman’s and other major institutions were forced into takeovers or simply went bust.
The collapse of Lehman Brothers on 15 September 2008 sent stock markets, which had been highly volatile, into free fall. Between Lehman’s collapse and March 2009, the FTSE 100 slipped from around 5,000 points to 3,500.
As we now know, March 2009 marked the trough. And while the past 15 years has been far from plain sailing, investors who held their nerve and resisted the urge to panic-sell have seen their patience rewarded.
Since Lehman’s collapse, in total return terms (which factors in dividends) the FTSE 100 index has gained 162%. This equates to 6.6% in terms of annualised returns, which is above the historic long-term average gains of around 5% a year for UK shares.
Investors who had the foresight or luck to invest in the biggest winners of the past 15 years will have enjoyed much higher returns.
QuotedData, the investment trust analyst, ran the numbers to identify the top-performing investment trusts over the period. It looked at investment performance – net asset value (NAV) – returns.
David Johnson, analyst at QuotedData, says that the performance of technology shares has been the key theme during the 15-year period. As well as producing stellar performance “the sector was also given huge leeway to take risks thanks to the rock-bottom discount rates investors used when assessing an investment’s validity, a consequence of ultra-low interest rates”.
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