The performance gap between equities and gilt investments has halved in the last 10 years, according to a report from Barclays Capital.
The report, which covers the last 101 years, reveals that UK equities returned an average 4.4 per cent more than gilts from 1899 until 2000, with equities returning 5.5 per cent compared with 1.1 per cent for gilts.
But this margin has contracted to 4.1 per cent over the last 20 years, with equities returning 11.8 per cent and gilts 7.7 per cent, and to just 2.4 per cent since 1990, with equities returning 11.8 per cent and gilts 9.4 per cent.
In the US, equities outperformed gilts by 7 per cent over 10 years to 2000, returning 14.1 per cent and 7.1 per cent respectively. The study claims demographic changes will further reduce this spread over the next decade.
The US equity boom has been fuelled by baby boomers aged 35-54 comprising high earners, savers and less risk-averse investors. These grew as a percentage of the US population from 9.5 per cent in 1979 to 30 per cent in 2001 but is now tailing off as the population ages.
The report predicts the bigger number of ageing investors will seek less risky investments and increase the demand for gilts when supply is limited.
The 35-54 age group peaks in the UK in 2006 and in continental Europe in 2009.