Pension funds and other large institutional investors are increasingly shifting their cash out of the troubled stock markets, according to research by Barclays Capital.

Demand for government and corporate bonds is expected to soar as a consequence.

"We believe that this sort of balance sheet restructuring will become popular in the UK as economic activity picks-up," the investment bank said.

The reason is the pension fund managers' desire to go for gold.

The stock market has failed to deliver strong returns on their investment over the last couple of years, so they have been forced to look elsewhere to make sure they have enough money to pay out on future pension liabilities.

These days, bonds seem both safer and more profitable.

Dire year

The UK stock market dramatically under performed the bond market by 14.4% in 2001, making it one of the worst years for stock market investors over the last century, according to the research.

UK investors saw their total return on equities fall 13.8% in 2001.

Investors in gilts, or government bond, fared better, seeing a 0.6% increase while corporate bond investors were rewarded with a 6% rise.

Historically, equities have outperformed bonds by 4.4% over the last century, though this declined to 2.4% for the 1990s, Barclays said.

The additional return that is traditionally associated with investing in stocks is seen as the premium that compensates the investor for the greater risks involved.

The sharp falls in total returns from the stock market over the last couple of years illustrate such risks.

In 2000, gilts outperformed shares by 14.7%, rising 6.1% while equity returns fell 8.6%.