AXA IM launches short duration inflation fund

AXA IM has announced the launch of the AXA World Funds Global Inflation Short Duration Bonds fund.

This diversified strategy aims to mitigate the impact of inflation and interest rate risk.

The AXA WF Global Inflation Short Duration Bonds fund is a Luxembourg-domiciled Sicav and is managed by Jonathan Baltora. He will be supported by Marion Le Mordhedec, manager of the AXA WF Universal Inflation Bonds.

The fund has both retail and institutional share classes and is registered for distribution in Austria, Belgium, Denmark, France, Finland, Germany Italy, the Netherlands, Norway, Spain, Sweden and the UK. It will soon be registered in Switzerland.

The fund approach will be similar to that of the AXA WF Global Inflation Bonds fund but with a short duration focus (0-5 years).

Jonathan Baltora, manager of the AXA WF Global Inflation Short Duration Bonds fund, believes short duration inflation-linked bonds can help investors fight inflation with less interest rate risk than longer duration bonds.

“They tend to closely track inflation. A key feature of the inflation linked bonds market is that the inflation paid out to investors is the same for every bond across the curve; investors looking for explicit inflation protection need not be exposed to all maturities.

“Short duration bonds can also be cheaper than longer duration inflation linked bonds. In these uncertain times, investors in short duration inflation bonds would be giving up less yield thanks to the flattening of the underlying real yield curve, which was particularly noticeable after the recent UK referendum vote.

“Long term inflation expectations tend to be anchored by central banks therefore short term fluctuations can create buying opportunities. Similarly the long end of the market could be considered a more crowded space due to demand created by pension funds looking for long dated linkers in order to match liabilities, again creating buying opportunities for short duration inflation linked bonds,” he said.

As of 31 March 2016, AXA IM had over €24bn in global short duration assets under management and assets invested in global inflation strategies reached €17.9bn.

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