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Fancy a short duration index-linked gilt fund to guard against inflation?

A new-ish short duration index-linked gilt fund from iShares gives UK investors an easy way to hedge against inflation – without taking on huge interest rate risk.

Now I realise that sounded like “schmargle bargle bumpty tumpty” to some readers.

So today I’ll explain as succinctly as I can why this new iShares fund should be good news for everyday UK investors like us.

/ programming interruption /

Update: 30 April 2024 – Very happy to confirm that this fund IS available to invest in with some major platforms, partly as a result of this article. So you can ignore the ambiguity below. However you may need to ask your own broker to add it to their platform before you can invest in it. Anyway, I’ll update this article to make this all clear when I get some time.

/ back to the show programming /

What’s that you say?

‘Should be’ good news?

Ahem – yes.

Alas there’s a catch. After a Monevator reader comment got us and others excited about this new fund, it transpires the reason we hadn’t heard of it seems to be because it’s institutional-only.

Which means peasants like us can’t get at it.

I say ‘seems to be’ because I haven’t been able to confirm this yet.

Certainly I can’t buy it on any of my platforms. Nor can Monevator contributor Finumus.

What’s more, I asked two brokers early last week whether they could make the fund available – including a giant famed for its supposedly-excellent service – and I’ve yet to hear a definitive answer back.

The signs are not good though.

Either way, I still think it’s worth us sticking our grubby noses up against the glass and gawping at this new model: the iShares Up to 10 Years Index Linked Gilt Index Fund (UK).

That’s because in our lusting over it, we can get a refresher as to why index-linked gilts can be tricky investments, despite their obvious appeal.

Want to go deeper after today’s drive-by? Then click the links throughout to learn more about inflation and index-linked gilts. You’ll surely impress your co-workers, classmates, and Tinder dates.

  • See the iShares factsheet for all the pernickety details.

What is duration?

We’ll start with a necessary but quick recap – the meaning of short, long, and duration in bond jargon.

In this context, duration refers to how much a bond price is expected to move as interest rates move.

  • High duration bonds (/bond funds) will tend to fall a lot in price when interest rates rise – and vice versa.
  • Low duration bonds (/bond funds) mostly shrug and say ‘meh’.

This may appear to be another example of the investing industry taking a perfectly sensible word – duration – and then using it to mean something only its disciples can understand.

However there is an underlying connection here, too.

Because of the mechanics of how bond income is paid out before the capital value of the bond is finally returned, there’s a close correlation between a bond’s stated duration and the length of time the bond has left to run before it matures.

Bonds set to mature ‘shortly’ – typically in the next few years – have a lower duration than bonds with many years left on the clock.

The same applies to bond funds. If they own a lot of short-dated bonds – those maturing soon-ish – they will have a lower duration than funds stuffed with longer-dated bonds.

By the numbers

Duration is expressed in the literature as a number.

For example if a bond’s duration number is 11 then it:

  • Loses approximately 11% of its market value for every 1% rise in its yield1
  • Gains approximately 11% for every 1% fall in its yield

Again, read our article on duration for a much deeper explanation.

Why is duration so important with index linkers?

All bonds are affected by changes in interest rates. Hence all bonds have a duration metric. They will perform differently in different interest rate movement scenarios.

However index-linked bonds are extra complicated.

That’s because the very reason you’d own linkers is to guard your portfolio against unexpected inflation.

And what happens when we see unexpected inflation?

That’s right, interest rates tend to rise in response. As we all have visceral experience of in recent years.

All bonds with high duration figures will suffer when interest rates rise a lot.

But with normal ‘vanilla’ bonds you might shrug and say, “them’s the breaks, I bought my bonds to guard against low growth / deflationary environments. I can’t expect them to do well when inflation takes off”.

But with linkers you’ll likely feel gutted.

That’s because you bought linkers to hedge your portfolio against unexpectedly high inflation. You got high inflation – and yet your (longer duration) linkers fell in price anyway.

It’s a rip-off! Where’s Martin Lewis when you need him?

Note though you are still getting your inflation protection. It’ll be there in the price return, as per the mechanics of how the linkers’ coupons and repayment amounts are adjusted higher with inflation.

The trouble is with a high duration linker, the impact of rising rates can overwhelm the uprating from inflation, because inflation is leading investors to demand higher yields from bonds, driving down prices.

2022 and all that

It’s easier to appreciate how this can happen now we’ve lived through a definitive example.

The problem we faced in the run-up to the bond rout of 2022 was that real interest rates were very low.

The ‘real yield’ (that is, what was expected after inflation) on some UK linkers was minus 2-3% at one stage.

This meant that even if you held such linkers until they matured, you could expect to earn a negative annual return of minus 2-3%!

That’s dreadful enough. But you might be thinking: “Huh? My longer duration index-linked gilts were down 50% at one point in 2022. That’s much more than a 2-3% decline!”

No doubt. What happened was instead of taking your negative 2-3% lumps for two decades, you got most of them in one whack as rates rose far faster than anyone expected – and bond prices duly sank.

This brought forward the baked-in pain. (And left index-linked gilts on positive real yields again, incidentally.)

Why short duration index-linked gilts?

Exactly why index-linked gilts were ever trading at negative real yields is a question for economists, academics, and fans of the stage illusionist Derren Brown.

I know the conventional explanation, obviously.

Talk to a pension fund manager and she might tell you she had to own index-linked gilts at almost any price, because it best matched the liabilities of her beneficiaries.

Also, maybe it wasn’t actually a given that either interest rates or inflation would go higher in the foreseeable future? Or at least not as savagely as we saw over the past couple of years. They’d stayed ultra-low for a decade after all, confounding many investors’ expectations.

Personally though, I don’t think there was much excuse for buying linkers on negative real yields of -3%.

Yes interest rates were near-zero for years. But this hardly seemed likely to last – uninterrupted – forever.

Hence to me index-linked gilts seemed like a time bomb waiting to explode.

This isn’t hindsight speaking. We alerted Monevator readers about this risk many times, most notably in late 2016. We adjusted our model portfolio allocation accordingly, too.

Thank goodness in retrospect. And yet who knows? Maybe everyone was right in that almost anything could have happened, in other universes?

But then time rolled on. The dice fell as they did in this universe, and we got a crash that perhaps wasn’t quite ordained, but which did seem likely to happen, sooner or later.

DIY dilemmas

Anyway, pension funds and other institutions faced difficult choices in the near-zero interest rate era.

But private investors had an extra problem if they wanted to reduce interest rate risk while also owning index-linked gilts.

That’s because the best way to reduce interest rate risk – while still getting some lovely inflation hedging – from linkers is to own the shorter duration ones.

But not many private investors had the knowledge or nerve to buy individual short duration index-linked gilts in the market.

And unfortunately the only retail-friendly linker funds available were high duration.

For example, from memory the iShares core index linker ETF – ticker: INXG – peaked at a duration in the mid-20s! Talk about an accident waiting to happen.

INXG’s duration has come down a lot – to under 16 – after the big decline over the past two years. It’s still high though, when you remember what it implies about how the price will move with a 1% move in its yield.

With scant UK alternatives, for our Slow & Steady model portfolio my co-blogger The Accumulator chose to reduce duration by taking its bond allocation global.

He plumped for a currency-hedged, shorter duration fund that owns inflation-linked foreign government bonds.

This successfully reduced the S&S’s exposure to interest rate risk, thanks to the new fund’s lower duration.

But it did also mean this part of the portfolio was now hedging more against global inflation, rather than UK inflation. A reasonable proxy, but not ideal.

The iShares Up to 10 Years Index-Linked Gilt Index Fund

Instead we could opt for this new iShares fund next time, if we’re ever faced with the same challenge. (If we can buy it, of course…)

Launched in June 2023, the iShares Up to 10 Years Index-Linked Gilt Index Fund already has more than £700m to its name.

The ongoing charge figure (OCF) is just 0.13%. But the minimum investment size is £100,000. That might seem a dealbreaker – or even proof it’s for institutions only – except that sometimes factsheets quote high minimums but the figures turn out not to apply to retail investors. (I still have hope.)

Here’s the skinny on this short duration index-linked gilt fund, as of my writing:

Source: iShares

Don’t be concerned at the fund’s low number of holdings. Not from a riskiness perspective, anyway.

As the UK government stands behind all gilts, they are all assumed to have the same credit risk – extremely near-zero, because it’s assumed the UK government will never default. Hence you don’t need to diversify gilts like you would individual corporate bonds or equities.

The fund is very new as I say, so we don’t have long-term data. But iShares is a top-tier fund house and we can assume this fund will behave just as you’d expect shorter-term index-linked gilts to act, minus a small drag from fees.

One of these funds is not like the other one

iShares awards its new linker fund a ‘3’ risk level. The risk scale runs from one to seven, where low is less risky.

Its conventional index-linked fund2 – which has a duration of over 18 – has a risk level of ‘6’.

Six is bigger than three. And so again, I don’t see why the short duration index-linked gilt fund shouldn’t be available to common folk like us.

The following graph shows how this lower risk playing out in practice.

The blue line charts the return of the iShares shorter duration linker fund since its launch in June. In yellow we have iShares’ standard longer-duration index-linked fund. Both funds are accumulation class

Note which one gave you the smoother (less risky) ride:

Source: Hargreaves Lansdown

Between October and December 2023, hopes rose that the rapid cooling of inflation would soon lead to much lower interest rates. But as 2024 has developed, markets have tempered their expectations due to somewhat sticky core inflation, especially in the US.

The graph shows how the longer duration linker fund reflects these changes in sentiment. Its value moves roughly 15% between the October 2023 trough to peak rate cut optimism in December. Its returns over this period are not driven much by inflation. Rather the move reflects changing interest rates.

In contrast, the iShares ‘Up To 10 Years’ linker fund is a sedate affair. Its much lower duration means it’s far less affected by changing interest rates.

Note you’re not getting something for nothing here. The real yields on shorter index-linked gilts are much lower than on longer-dated issues – less than 0.25% for linkers with less than five years to run versus a real yield of over 1% if you go 20 years out, according to TradeWeb.

It’s not that one fund is ‘better’ per se than the other fund.

It’s that they are doing different things.

What’s the alternative?

Now we know why owning a short duration index-linked gilt fund could be appealing. But what can we do instead of buying it – since for now it seems we can’t?

Create your own short duration index-linked gilt fund via a linker ladder. Basically DIY your fund but only from shorter duration index-linked gilts up to ten years. We’ve written about how to create a linker ladder [for members]. You can expect a lower yield than with a longer-duration ladder, but less volatility.

Buy a longer duration index-linked gilt fund anyway. As I’ve said, the duration on the standard iShares’ ETF (ticker: INXG) has come down to just below 16. That’s still pretty wild if interest rates move. But (a) it’s lower than it was and (b) interest rates seem more likely to come down than to rise, so it could work in your favour as lower rates would push its price up. Crucially, real yields for index-linked gilts are positive right along the curve now. You’re not being charged a negative return for inflation protection like in 2021.

Invest in a lower duration global inflation linked bond fund that’s hedged back to UK pounds. As noted, this is what The Accumulator did with the Slow & Steady portfolio. Global inflation should roughly proxy UK inflation – though over the short-term especially they could diverge. Hedging protects you from currency risk and lowers volatility, but note currency moves are also a mechanism that corrects for inflation differentials. Which means there are scenarios where you might wish you owned such bonds unhedged.

Buy some US Treasury Inflation Protected Securities. I own a slug of the iShares US TIPS ETF (ticker: ITPS). It’s cheap and the duration is just under 7. My bond allocation is modest and only really there for some peace of mind in a crisis, so I’m happy with (unhedged) US dollar exposure. Often – but not always – the US dollar does well when markets crash.

Increase your cash allocation. I believe cash is the king of asset classes. However it tends to get a bad rap in investment circles. You won’t retire early or rich if you only hold only cash. Strategically though, a chunky allocation to cash provides many benefits, from dampening volatility to dry powder for investing into sexier stuff during a bear market. You can think of cash as a short-term bond with a duration of zero. Allocating to cash therefore pulls down your overall average fixed income duration. Cash earning a decent interest rate can also help you with (imperfect) inflation hedging. You noticed how interest rates rose as inflation spiked over the past two years? Not by enough to match the worst of it, but enough to keep the lights on. (Obviously I’m talking about milder inflationary bursts here, not actual hyperinflation.)

This short duration linker fund should be available to us

When you consider all the bonkers stuff you can buy on your broker’s platform, there is no good reason for this particular fund not to be available to private investors.

I mean, two years ago ‘bonkers stuff’ included a long duration index-linked ETF from iShares that at that time was primed to crash 50% in a year when interest rates rose.

Such interest rate risk is massively lower with iShares’ short duration index-linked gilt fund. True we can also expect a lower return – because its holdings are on lower real yields – but that isn’t a risk, it’s pricing.

Who knows. Perhaps I’ll press ‘Publish’ on this post and immediately receive news from my broker that it has made the fund available. I’ll drop a note into Weekend Reading if so. Subscribe to ensure you get it!

Until then we can only dream of owning such easygoing inflation protection.

(As well as asking ourselves some serious questions about when and why we began dreaming about funds, and whether it’s entirely healthy…)

  1. Yield to maturity. You can think of it like the interest rate you’ll get provided you hold the bond to maturity. []
  2. Not its longer duration ETF I mentioned earlier, though they’re very similar. []
{ 29 comments… add one }
  • 1 Delta Hedge April 24, 2024, 4:09 pm

    Thank you for the as always excellent article @TI.

    Is now the time/macro backdrop to be looking at shorter duration? Consider the case against:
    – Longer index linked durations brought on substantially negative real yields, as in the years up to 2021/22, would be a clear risk. But longer durations brought on substantially positive real yields could be a significant opportunity.
    – Real yields could go higher still, thereby depressing prices. But they could also fall, raising capital values of linkers in the secondary market.
    – Whilst long duration Index Linked Gilts have real yields to maturity of only ~1% p.a.; the 30 year US TIPS just hit a real yield of 2.36% p.a., very close to the 2.51% p.a. real yield to maturity which it very briefly touched in October 2023:
    – Using the rule of 72 means that, in US $ real terms, the 30 year US TIPS will double (in inflation adjusted $ purchasing power) over the full 30 year terms (albeit that its’ value will of course fluctuate in the meantime on the secondary market).
    – So, bar a default on the US debt, holding long duration TIPS to maturity over a 30 year term now can double $ denominated spending power whilst leaving only FX risk to hedge or not:

  • 2 M White April 24, 2024, 4:43 pm

    IShares also do an under 5y US TIPS ETF

  • 3 Hariseldon April 24, 2024, 5:09 pm

    Interesting article, I hold some individual Gilts, including Index Linked but a shorter duration fund would be welcome and easier to manage. I notice the management fee is .1% on the class D of this short duration Gilt Fund ( .05% on class S and .04% on class X) this is a retail level of pricing and the lower priced offerings are presumably more institutional, is encouraging that we may see it become available.

    With US Tips we have a choice of under 5 years, under 10 years , over 10 years and the total market fund ITPS that you mention, with variety of hedged currency options, lets hope the brokers read Monevator and add an alternative Index Linked Gilt fund for us !

  • 4 DavidV April 24, 2024, 5:28 pm

    I bought a relatively small amount of INXG in 2020 (~1.6% of my portfolio). I knew the risks having read all the Monevator articles, but nevertheless felt the need to dip my toe in the water with some form of inflation-linked asset as Index-Linked Savings Certificates were obviously unlikely to return. I duly learned the painful lesson in 2022. My holding is currently worth 66% of what I paid, but I have had distributions in the meantime.
    My current preferred inflation-linked asset is TI5G – 0-5 years TIPS hedged to GBP (current duration 2.37 years).
    INXG was obviously a mistake, but I don’t think buying a short-duration individual linker at -3% real yield would have been. Nominal gilts were paying 1% or less for short-duration and an assumption of long-term inflation of 3% was not unreasonable IMHO. Insurance has a cost so a slight premium on a nominal gilt would be expected. An individual short-duration linker would still have provided protection against the unexpected inflation we got in 2022.

  • 5 Jonathan April 24, 2024, 6:08 pm

    For years, nobody cared about inflation, and then it came roaring back.

    Now everyone’s sensitive about inflation, and ready to pay a premium to protect against it.

    Except the premium is likely to be too high, because everyone’s sensitive about inflation. Furthermore, the central banks are now on top of inflation, and ready to through the local economy under the bus in the short-term to defeat the monster long-term.

    This is unlikely to be the right time to buy inflation-proofed products, and instead one might consider fixed-interest bonds, which are now underpriced, because all the investors are irrationally spooked about inflation.

  • 6 Martin T April 24, 2024, 7:19 pm

    The giant famed for excellent service is no longer such: I asked it to add the new lowest cost all-world GBP denominated Invesco ETF FWRG, and it instead added the New York listed First Watch Restaurant Group. When I tried again, they refused, with a reason @Finimus said was entirely spurious.

    Outward transfer just initiated!

  • 7 ZXSpectrum48k April 24, 2024, 7:28 pm

    @Jonathan. I have sympathy with your view.

    At the short-end, say sub 10-year, linkers do seem expensive. The 5-year inflation breakeven rate is around 3.9% (so you need RPI to average 3.9% or higher over the next five years for linkers to outperform nominals). That compares to a typical 2-3% breakeven over the last twenty years or so.

    Meanwhile the 30-year inflation breakeven rate is 3.3%. Smack bang in the middle of the range. The fly in the ointment is that beyond 2030, RPI is defined as CPI. Given CPI tends to be lower than RPI then you’d expect the breakeven rate to be lower than historically since most of that 30-year period will be with lower indexation.

    Personally, I’m steering clear of short-dated linkers, prefering nominals. Nonetheless, I do own longer-dated linkers because while they are not cheap, something like the 0.125% 2051 does offer a 1.45% real yield. Not amazing but not terrible given it’s CGT free. Plus long-dated linkers are the correct hedge against annuity rates falling back to lower levels.

  • 8 LateGenXer April 24, 2024, 9:10 pm


    I wonder if long term breakeven rates are slightly lower in the long end than shorter end are more a reflection of the inflation expectations (inflation staying above 2% target for longer, and RPI -> CPIH) than a high inflation risk premium people willing to pay.

    Per https://www.bankofengland.co.uk/working-paper/2023/mispricing-in-inflation-markets the inflation risk premia was about 1.51% in 2022. It also states that “Average mispricing is substantial larger at long maturities (longer than 30 years), whereas find no significant mispricing at short maturity (less than two years)” That said, this research predates the peak of the inflation bout we had.

    On their excellent linkers webinar, CG Asset Management made an interesting case on why linkers are a good diversifier in the likely stagflation / financial repression era that will come ahead. (Unliked nominal bonds which are now positively correlated with equities.) Of course, they’re playing their book. Still, worth a listen.

    See https://www.cgasset.com/category/articles,media,podcasts,reports,webinars/?s=index-linked

  • 9 LondonYank April 24, 2024, 10:05 pm

    Great article helping demystify the world of fixed income.

    I’m surprised you didn’t mention the Capital Gearing IL fund that recently launched. Not quite a tracker, but low duration (5 years) and 0.15% management fee:

  • 10 The Investor April 24, 2024, 10:28 pm

    @LondonYank — Didn’t know about that new CG fund, that’s why I didn’t mention it — and I also missed their seminar unfortunately. Looks a nice spot, thanks for sharing! (Tell me this one is available to retail?! 😉 )

    @Jonathan @ZXSpectrum48K @ LateGenXer — Don’t disagree with any of that, especially with my active hat on. The article is flagging up a new fund (and what it can do for you) rather than banging the drum to load up on short duration linkers. 🙂 With that said, while some may be able to profitably do a bit of active timing, the majority of Monevator readers aim towards more fixed and rebalanced asset allocations, or at least allocations that change with rules. So for them, adding their dollop of short duration linkers isn’t about when but whether. And given the record of some professional tactical allocators, it will prove a sounder approach for most than trying to trade these things.

    See: https://www.morningstar.com/portfolios/they-came-they-saw-they-incinerated-half-their-funds-potential-returns

    @Martin T — Well at least that cock-up has some comic flair I suppose. 😉 Frustrating though!

    @DavidV — A mistake then, but perhaps not now. Real yields on longer-duration linkers are modest but very positive, as @ZX notes above. Personally I began messing about with an allocation after the Truss debacle. A ladder is better, but more hassle than I can be bothered with. (I just want enough bonds of various flavours to pay the mortgage in a crisis, but then I’m a naughty active investor so everyone else’s mileage may and should vary! 🙂 )

    @Hariseldon @M White — Indeed, you’d think these things would essentially be copy-and-paste into a new territory by now, although perhaps the fixed income market is a bit more fiddly than equities for ETF managers and they need to be sure of bigger size, not sure. Thoughts welcome from those who know about such stuff. The iShares range has steadily and massively increased, so here’s hoping we get everything our American friends enjoy in time…

    @Delta Hedge — Yes, I have a slug of the US TIPS ETF in my modest fixed income allocation, as mentioned in the article. With that said currency moves have a way of undoing yield divergencies in the long-term, though the maths escapes me right now. (Suspect I bath-tubbed it as above my pay grade haha. But Dimson, Staunton, and Marsh wrote quite a bit about it a few Yearbooks back, from memory).

  • 11 LateGenXer April 24, 2024, 10:36 pm

    The CG fund is on IWEB — https://www.markets.iweb-sharedealing.co.uk/funds-centre/fund-supermarket/detail/IE000ZSVG218

    I added to my shortlist, but I haven’t invested it so far, mostly because if I hold linkers, it will likely be outside tax wrapper, hence best holding individual gilts.

  • 12 Meany April 24, 2024, 10:42 pm

    I would be interested to hear did anyone here buy a short linker in the last 5 years that just did/will mature? How much did it actually return? Were you effectively cut down to something like the recent cash bond rates by the negative real yield effect and all that?

  • 13 Prospector April 24, 2024, 11:23 pm

    @LateGenXer , Personally I think levels of inflation implied by breakevens on inflation linked gilts are higher than we might expect.

    If this is the case breakevens are to some extent reflecting a premium for providing inflation protection.

    Inflation gilts will only outperform nominal gilts (of same duration) if actual inflation is higher than implied by breakevens (at the time of purchase). Conversely if actual inflation comes in at less than breakeven inflation linked gilts will underperform nominal gilts. You might still be happy in this scenario as hopefully your cost of living has increased by less than expected since you bought the linkers too .

    It’s really only unexpected inflation that hasn’t already been priced into the market that inflation linked gilts are protecting you from.

    I hold long dated linkers as a partial hedge against stagflation.

    @meany I think tradeweb has history of all gilt prices including inflation linked gilts. So you can see you how much they matured for by putting the day prior to maturity. I suspect the recent unexpected spike in inflation in 2022 would have offset the initial negative real yield if you bought the March 24 linker in 21.

  • 14 Alan S April 25, 2024, 10:08 am

    I note that the nominal version of the two ishares under 10 year gilts funds appears to be available for retail purchase at A J Bell


    So, to me, it seems unlikely that the inflation linked version will not be available for retail. Maybe no-one has noticed it (although £750m of net assets might bely that statement!) or no-one has asked the retail platforms to add it until now. I have to confess that I’d assumed a D class fund would be made available, but have yet to ask the broker I use to add it to their list.

  • 15 LateGenXer April 25, 2024, 10:17 am


    I took the historical 5 years prices from Tradeweb of a pair of conventional bonds that matured earlier this year:
    – GB00BFWFPL34 (TG24)
    – GB00B85SFQ54 (TR24)

    And then plotted for every date:
    – Yield To Maturity of conventional (YTM_TG24) if one bought the gilt that day
    – *Actual* (not expected!) Yield to Maturity of the linker (YTM_TR24) if one bought the linker that day
    – Difference between the two above (IRP), a proxy for inflation risk premium
    – Inflation YoY

    Graph can be seen on

    (Note this is not exact apples to apples because maturity is not exactly the same, linkers have a lag, etc. etc.)

    It should come as no surprise that 5 years ago nobody was expecting the recent bout of inflation, hence linker massively outperformed conventional gilt.

    In fact, linker would outperform the conventional right up to the peak of inflation, because markets have been systematically expecting inflation to come down quicker than it has.

    But that is past behavior, and just because inflation was underestimated until now it doesn’t mean that now the market is still underestimating it. Many other commenters argued the opposite above: that the market is overestimating inflation, and linkers are now expensive.

    Unfortunately inflation risk premium can only be calculated a posteriori, after the fact. I don’t know if/how to predict the inflation risk premium going forward. I suppose one would need some sort of model, and hope it would accurately work on the current circumstances.

  • 16 The Investor April 25, 2024, 10:22 am

    @Alan S — It is weird. Unfortunately A J Bell is one of the (few) platforms I don’t have anything with (no big inditement etc, just the way history has unfolded) so please do report back if you here from them.

    I’m *still* waiting to hear back from a couple of mine…

  • 17 weenie April 25, 2024, 11:25 am

    Interesting fund, TA – something I could consider when/if made available.
    A couple of years ago, freaked out a little by negative bond yields, I switched most of my bond holdings into ‘defensive investment trusts’. Definitely not my greatest investment decision as most of them have performed really poorly since. This year, I’ve switched some of them back to bonds, but rather than VGOV and INXG (which I still hold), I’ve gone for iShare’s Ultrashort Bond ETF (UESD), which also ticks an ESG box for my portfolio. I don’t expect it to do much, I guess it’s just like cash.

  • 18 Alan S April 25, 2024, 12:09 pm

    @LateGenXer (#15) and @ Prospector (#13)

    With respect to expected inflation (although I prefer the BoE terminology of implied inflation) and actual inflation, I’d agree with what you have said (i.e., which will do better out of nominal or linkers depends on both implied inflation and actual inflation). However, I think it is also important to note that, historically at least, that inflation is rather asymmetric in that the distribution of values above the mode has a longer tail than that below the mode (i.e. the UK has had annual inflation above 10% frequently enough, but, so far, annual inflation has only been below -10% once). FWIW, according to the annual cpi data (1870-2020) at macrohistory.net, the mode is 0%, the median 2.2%, and (arithmetic) mean 3.2%. In other words, based on the past, the downside of linkers might have been less bad than the downside of nominal gilts. Whether this will be true in the future is impossible to say.

  • 19 Alan S April 25, 2024, 12:19 pm

    @TI (#16)

    Sorry, I’m not with A J Bell either (iweb) – I found the info by dint of going through your extensive broker list and searching for the two funds on each platform (the ways we retirees find to fill our days, eh?).

  • 20 Harry April 25, 2024, 4:14 pm

    @weenie, I too used the usual defensive IT’s for my ‘bond’ allocation so feel your pain. They have started to recover of late though so who knows, RICA may turn out to be a good call.

  • 21 weenie April 25, 2024, 5:22 pm

    @Harry – I’ve not ditched them all and do hope the ones I’ve kept (including RICA) will turn out to be ok in the end!

  • 22 Sparschwein April 25, 2024, 9:42 pm

    Nice find, thanks. It’s good to have a short-ish UK alternative to short-duration TIPS (e.g. TP05).

    AJ Bell shows the Class D Dist. version GB00BN091J35 as available in all accounts.

  • 23 Mirror Man April 25, 2024, 10:47 pm

    Another really great article, thanks @TI. In the article, you wrote:

    “This meant that even if you held such linkers until they matured, you could expect to earn a negative annual return of minus 2-3%!

    That’s dreadful enough. But you might be thinking: “Huh? My longer duration index-linked gilts were down 50% at one point in 2022. That’s much more than a 2-3% decline!””

    I completely understand the point that you are making, but, for complete clarity, the first part might benefit from adding the word “real”. I’m no expert in IL-bonds, but my understanding is that the linkers, in this scenario, return minus 2-3% real, not minus 2-3% nominal, every year. And therein lies the enigma of linkers. I agree that a minus 2-3% real return is “dreadful enough” and it would seem like madness to purchase an asset with that kind of return baked in. However, if I’ve understood this correctly, when inflation hit 10% very recently, these same linkers on negative real yields should have provided a 7-8% nominal return during that specific period of unexpected, double-digit inflation. A risk-free 7-8% nominal return in 2022 was probably a pretty good outcome considering the hammering that some other asset classes took and I’m sure many investors who were in equities and nominal bonds would have gladly signed up for 7-8% nominal! Of course, the price action on linkers was a completely different story, but that should not matter if you are holding to maturity.

  • 24 Meany April 25, 2024, 11:31 pm

    @LateGenXer (and @Prospector)
    thanks very much indeed! I hope others found that illuminating.
    I’ll try not to rattle on too much as very little actual knowledge to contribute.
    I note there was no “sweet spot” where someone could actually buy the
    full inflation spike using a linker – I think this is intuitively what people expect.
    And since early 2023, and I think before Mar20 there were def easy safe
    ways to beat that linker in the bank.
    And the Kwasi moment! wow.

  • 25 The Investor April 30, 2024, 9:57 am

    Very happy to confirm this fund IS available to retail.

    I’ve eventually had a reply back from Hargreaves Lansdown stating:

    The iShares Up to 10 Years Index Linked Gilt Fund has now been added to the HL platform and available to trade and hold in your HL account.

    That said, I can’t actually find it on the platform. Have sent another note.

    @Sparschwein — Cheers for that confirmation, too.

  • 26 The Investor May 3, 2024, 10:15 am

    Finally it’s on the platforms.

    For example here it is at Hargreaves Lansdown:


    Note that all the fund factsheet information seems to be wrong (as of this writing it claims it was launched in 2012 and there is nearly £2bn in assets, which doesn’t tally with iShares at all) but clicking through to Invest is giving me the ability to buy the correct fund.

    So I think we’re there in practice! 😉

  • 27 RC May 15, 2024, 12:48 pm

    There is an abrdn GBP Hedged under 10 year inflation linked bond fund:
    abrdn Short Dated Global Inflation-Linked Bond Tracker Fund B Acc (GB00BGMK1733). Which is available on my platform (ii) at 0.12%

    Unfortunately the ishares wont be offered on ii. I got this from customer service:
    “Unfortunately, the requested instrument is not supported by our provider. “

  • 28 DaleK June 12, 2024, 2:10 pm

    Looks like ii *will* makes the iShares up to 10 years Index Linked Gilt Index available. I had posted on another thread that they said they couldn’t, but it looks like I had inadvertently enquired about the ‘X’ class in error – doh!

    ii’s latest update to me last week explained: “…we will be looking to offer the D class version once enabled and the ISIN for this is GB00BN091H11.”

    I’ll confirm when I’ve been able to trade.

  • 29 The Investor June 12, 2024, 3:05 pm

    @DaleK — Great — I asked them when I wrote the piece but hadn’t heard back. Cheers for following up!

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