Silver as A Strategic Asset for UK Institutional Portfolios - Risk, Diversification and Net Zero Alignment (2010–2025)

This study investigated the strategic role of silver as a strategic asset for UK institutional portfolios over the period 2010–2025, addressing five core research questions spanning risk-return properties, portfolio diversification, macroeconomic sensitivity, optimal allocation, and Net Zero alignment. The study adopted the iShares Silver Trust (SLV) as a proxy for silver return, this study compared standalone risk metrics against UK institutional benchmarks (FTSE 100 equities and 10-year Gilt bonds). The study used monthly data on silver returns, FTSE 100, UK bonds, inflation, green energy demand proxies, and currency movements, return on investment with zero risk and price of gold to silver.
The study used ex-post facto for this study. Monthly data of variables was collected between years 2010 and year 2025. Validated data were obtained from Yahoo Finance and the Office for National Statistics (ONS) with data’s reliability grounded in the established institutional authority of these platforms. Data were analysed using descriptive and inferential statistics.
The research employed a mixed-methods approach incorporating OLS regression, GARCH(1,1) volatility modelling, and multi-objective portfolio optimization (Sharpe, Sortino, and CVaR).
The findings revealed that silver offers superior risk-adjusted returns (Sharpe Ratio: 0.1929) compared to equities (0.0982) and bonds (-0.1845), driven by its unique dual nature as both a monetary hedge and an industrial commodity. Regression analysis revealed that equity has a significant negative impact on silver prices, whereas bonds exert a significant positive effect. Also, UK inflation (Log CPI) and the risk-free rate are significant positive drivers, while GARCH modelling confirmed the presence of volatility clustering. Furthermore, the study demonstrated that moderate silver allocations (4%–8%) significantly enhance portfolio efficiency and resilience. From a sustainability perspective, silver is identified as a "high-alignment" asset under the TCFD framework, providing a critical hedge against transition risks due to its indispensable role in solar photovoltaic and electric vehicle technologies. The study concluded that silver serves as a vital "return engine" and climate-resilient diversifier, supporting the fiduciary duties of UK institutional investors in a Net Zero-aligned economy.

Silver, Portfolio Diversification, UK Institutional Investment, Net Zero Strategy, TCFD, Green Transition, Risk Management, Portfolio Optimization

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