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    The case for UK corporate bonds with managed inflation risk

    The case for UK corporate bonds with managed inflation risk

    10 June 2024 Fixed income

    One of the most significant threats facing fixed income investors is that inflation proves to be far stickier than currently expected. Although it is possible to hedge inflation risk via gilts, this is an expensive way to do so. We believe a better solution is to combine corporate credit with an actively managed inflation component, utilising a combination of inflation swaps and carefully selected inflation-linked corporate bonds.

    The strategy seeks to maintain a significant hedge against inflation at all times, but varying exposure depending on market pricing with the aim of maximising protection during periods where inflation risk is under-priced, and minimising downside risk when markets are fully priced.

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