Fears of a ‘hard Brexit’ have led to further sharp falls in the Pound over the past few days, with trade-weighted sterling recently hitting a record low. Over the coming months, Ben expects there to be a knock-on effect on consumer prices as retailers are forced to pass on higher import costs. With fuel prices also set for further increases as oil markets continue to recover, Ben believes the UK could experience a meaningful pick-up in inflation over the coming months. However, with inflation-linked bond markets pricing in a relatively modest increase in UK inflation, he thinks investors still have an opportunity to lock-in inflation-adjusted returns at relatively attractive levels.
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The fund’s flexible investment approach allows Ben to move into many different areas of the index-linked bond and global credit markets. In this webcast, he will give more detail on some of his key convictions at the moment. For instance, the fund maintains a significant allocation to US TIPS, as he believes a buoyant US labour market, a pick-up in wage growth and higher oil prices will soon start to put upward pressure on US inflation. He also sees good value in longer-dated US credit, where the favourable economic backdrop and an attractive pick-up in spreads has created some compelling opportunities.