Buy Government Bonds: Fund Manager

Buy Government Bonds: Fund Manager

Index-linked government bonds should once again be part of an investor’s armoury of inflation hedges, according to a Percival Stanion, head of multi-asset group at Baring Asset Management.  

He said strong growth in the world’s emerging economies and demand for commodities had pushed the price of agricultural and energy commodities higher.  

He also suggested companies in the Middle East and Russia for example, offer excellent protection against the risks of inflation to investors, as does Latin America.  For larger portfolios Mr Stanion said direct commodity funds were a good way of diversifying returns and participating in assets likely to show strong price appreciation.

Our view

He also suggested that inflation-protected government bonds (index linked gilts) do not offer substantial return potential but they do offer protection against inflation.  We would disagree to a certain extent with this comment.  Index linked gilts have had returns in excess of 14% in the last year and therefore we believe they are over valued.  The old rule always stands, buy low, sell high.

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