M&G is launching what it believes to be the first inflation-linked corporate bond fund aimed at retail investors in the UK.
It is also launching, subject to authorisation, a Euro-denominated version of the strategy for sale across Europe.
The lead managers of the M&G UK Inflation Linked Corporate Bond fund will be Jim Leaviss, head of the group’s retail fixed interest team, and Ben Lord.
The pair will be running an actively managed portfolio of inflation linked bonds with the objective of producing a return in the medium to long term ahead of inflation as measured by CPI.
The fund will use the same M&G investment process of top down macro calls, with active management of individual bonds spread across UK inflation linked bonds issued by the likes of Tesco, floating rate notes and some inflation linked gilts.
Leaviss said the fund is aimed to ‘fill the quiver of arrows in the bond space’ for M&G as it complements its existing range of high yield, gilt and strategic bond funds. He says it is designed to meet the needs of those investors worried about inflation.
He says: "Some investors do worry about the resurgence of inflation. We are not petrified about inflation because there is currently plenty of spare capacity in the global economy but a couple of years down the line inflation may become more of a problem.
"If that is the case then this fund might be suitable for certain investors."
The inflation-linked market in the UK is currently around £11bn in value with between 250 and 300 issues.
The new fund has a minimum investment of £500 and an initial fee of 3%. It has an annual charge of 1% for the Sterling A class shares.
£300bn of liabilities
View from the front row
Transfer from occupational scheme
Appointed by FCA and PSR boards