Smith & Williamson is pleased to announce 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.
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 aim to enhance 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.
To mark the launch, 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.”
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By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of publication.
Notes to editors
Smith & Williamson is an independently owned financial and professional services group. The firm is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices, entrepreneurs and mid-to-large corporates. The group’s c1,700 people operate from a network of twelve offices: London, Belfast, Birmingham, Bristol, Cheltenham, Dublin (City and Sandyford), Glasgow, Guildford, Jersey, Salisbury and Southampton.
Investment does involve risk. The value of investments and the income from them can go down as well as up. The investor may not receive back, in total, the original amount invested. Past performance is not a guide to future performance. Rates of tax are those prevailing at the time and are subject to change without notice. Clients should always seek appropriate advice from their financial adviser before committing funds for investment. When investments are made in overseas securities, movements in exchange rates may have an effect on the value of that investment. The effect may be favourable or unfavourable.
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