Smith & Williamson launches global inflation-linked bond fund

Smith & Williamson announced the launch of the Smith & Williamson global inflation-linked bond fund. The fund aims to provide a transparent, cost-effective investment solution for investors who are concerned about inflation but who are also worried by the significant duration risk embedded in UK government index-linked bonds.

The fund is managed by Thomas Wells and will provide global exposure predominantly to government-issued inflation-linked debt. It may also invest selectively in investment-grade sterling inflation-linked corporate bonds with the aim of enhancing returns.

The team will seek to add value through country selection, taking positions of plus or minus 10% relative to the benchmark and also actively managing duration within countries. The ability to utilise the Smith & Williamson fixed income team’s detailed knowledge of corporate issuers provides an additional driver for potential within sterling credit markets.

The fund, a Dublin-domiciled Ucits vehicle, will be focused on high-quality global debt with an average S&P credit-rating of AA, with any non-GBP exposure fully hedged to sterling. It will be benchmarked against the iBoxx global inflation linked bond index, also hedged to sterling.

Smith & Williamson is offering all investors access to an institutional share class with an annual management fee of just 0.25%. The offer period, which will run for 12 months, will enable retail investors to benefit from active management at a fee level that is competitive with ETFs and passive funds.

Wells said: “We have a good track record of producing transparent and dependable investment solutions in fixed income, and have now extended this to the global inflation-linked arena. To us, a global inflation-linked fund makes a lot of sense. UK inflation-linked gilts are very expensive and embed a high level of interest rate sensitivity due to their very long duration – in other words, you have to take a view on where UK rates might be headed, as well as having a view on inflation. Investing globally means that we can obtain materially better yields to maturity with much less duration risk.”

Ed Rosengarten, head of funds at Smith & Williamson, said: “These are exciting times for the funds business at Smith & Williamson and we are delighted to look to continue our track record of providing investment-led solutions to real-world problems. Investors are increasingly concerned about inflation and we have listened to them. Gilts, including linkers, have had a stellar 2016 and there is clearly demand out there for better value and lower-risk inflation hedges. In our opinion, the global inflation-linked bond fund is a transparent and lower-risk solution to the potentially corrosive effects of inflation and offers good value for money.”

Ridhima Sharma
Ridhima Sharma speaks German and is DACH Correspondent for InvestmentEurope. She has more than 8 years of experience in the media industry. Before joining us, she was working in India and covering automotive and lifestyle sectors. Over the years many of her stories have been published in various magazines across India.

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