UK - Barclays Global Investors has so far secured £128m from institutional investors for its new Ascent UK Real Return Bond Fund.
The new fund combines traditional index-linked bonds with swaps, derivatives and other securities. BGI claims that by creating synthetic corporate indexed bonds for the fund, the opportunity set for investment is increased - more so than by just using government indexed bonds.
BGI’s head of fixed income strategy, Partha Dasgupta, said: “Pension funds want to make asset allocation decisions that enable them to closer match their fund liabilities.
“The advantage for pension funds of investing in index-linked bonds is that they provide built-in inflation protection for their fund.”
Ray Martin, head of pensions & executive remuneration at the Scottish and Newcastle Pension Scheme, which has already made an undisclosed commitment to the fund, said: “The trustees are looking for improved ways to manage and protect our members’ money.
“BGI has provided us with an innovative fund that will provide us with low risk incremental returns on index-linked assets while closer aligning our fund’s liabilities.”
The Dublin-domiciled fund is actively managed and invests in UK and overseas government index-linked, and corporate index-linked bonds. In addition, the fund is allowed to invest in other instruments linked to UK inflation, such as LPI (Limited Price Inflation) bonds.
It is benchmarked against the FTSE UK Gilts Index-Linked Over 5 Years Index and aims to outperform by 0.5% per annum, net of fees over a rolling three-year period. Minimum subscription is E250,000. Fees are 25 basis point per annum.
BGI manages over £90bn assets worldwide of which some £32bn is managed in London. Some £10bn is in index-linked assets.
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