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Global Inflation-Linked Bond fund launch offered at institutional share class

13 July 2017

Smith & Williamson has launched its Global Inflation-Linked Bond Fund, and is offering all investors access to an institutional share class with an annual management fee of just 0.25%.

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 institutional share class offer period will run for 12 months and will enable retail investors to benefit from active management at a fee level that is competitive with ETFs and passive funds.

The 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.

It will be managed by Thomas Wells, who is part of the fixed income team running the £484m Smith & Williamson Short-Dated Corporate Bond Fund, the fund 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 can also 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.

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.”

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