Since Mike Riddell and his team at Allianz Global Investors took over management of the Allianz Gilt Yield Fund in November 2015, the Fund now sits as the top performing FTSE All-Stocks gilt fund in the sector (data source: Morningstar).
The team has successfully demonstrated their leading knowledge of gilt markets and the repeatability of their investment strategy and process by outperforming their benchmark in each consecutive month from November 2016 to October 2017. The award-winning team is now proud to announce that they are launching a new fund dedicated to investing in another section of the gilt market: The Allianz Index-Linked Gilt Fund. Mike is supported by Kacper Brzezniak who is the deputy portfolio manager on the Fund. We spoke to Mike and Kacper about their new strategy.
Mike Riddell:
Index-linked gilts are UK government bonds whose cash flows are linked to inflation, and they make up about 30% of the outstanding gilt market. Traditionally, they are used as a protection against a pick-up in inflation above that which the market anticipates. Given the success of the Allianz Gilt Yield strategy within the gilt space, we have decided to launch a sister strategy for the Allianz Index-Linked Gilt Fund. The Fund will utilise 5 core strategies for generating alpha in the index-linked gilt market: Duration, Curve, Relative Value, Conventionals, and Cross-Market.
Kacper Brzezniak:
The fund will sit in the Investment Association (IA) Index-Linked Gilt sector, therefore abiding by sector rules it will have at least 80% of the Fund invested in Index-Linked gilts, but retains the flexibility to go off benchmark when we see better cross-market or breakeven opportunities. This could include buying US Treasury Inflation Protected Securities (TIPS) when these look more attractive than their index-linked gilt counterparts, or even buying conventional gilts when they look attractive relative to index-linked gilts. Any non-sterling investments will be 100% hedged back to sterling, so that there will be no FX risk.
Mike Riddell:
We believe that index-linked gilt markets are even more inefficient than conventional gilts, and this opens up opportunities within the sector. Many of the largest index-linked gilt funds are currently passive, which don't have the capability of harvesting these inefficiencies to generate outperformance that active funds do. The Fund will aim to outperform the benchmark of, the
FTSE Actuaries UK Government Index-Linked All
Stocks Total Return GBP (Midday) Index, following a similar strategy that we have successfully implemented in the Allianz Gilt Yield Fund.
Kacper Brzezniak:
In line with the existing gilt strategy, the Allianz Index-Linked Gilt Fund will also be priced, in our view, very competitively for an active fund relative to its passive peers. The ‘early-bird' share class will have an Ongoing Charges Figure (OCF) of 0.20%, available for the first £105m of investment, and then the I share class will then have an OCF of 0.30%. The Allianz Gilt Yield Fund I Inc share class currently has an OCF of 0.32%.
Further information on Mike Riddell and our Allianz Index-Linked Gilt Fund can be found by clicking here.
Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested. Investing in fixed income instruments may expose investors to various risks, including but not limited to creditworthiness, interest rate, liquidity and restricted flexibility risks. Changes to the economic environment and market conditions may affect these risks, resulting in an adverse effect to the value of the investment. During periods of rising nominal interest rates, the values of fixed income instruments (including short positions with respect to fixed income instruments) are generally expected to decline. Conversely, during periods of declining interest rates, the values of these instruments are generally expected to rise. Liquidity risk may possibly delay or prevent account withdrawals or redemptions. Past performance is not a reliable indicator of future results. If the currency in which the past performance is displayed differs from the currency of the country in which the investor resides, then the investor should be aware that due to the exchange rate fluctuations the performance shown may be higher or lower if converted into the investor's local currency. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful misconduct. The conditions of any underlying offer or contract that may have been, or will be, made or concluded, shall prevail. This is a marketing communication issued by Allianz Global Investors GmbH, www.allianzgi.com, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42-44, 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (www.bafin.de). Allianz Global Investors GmbH has established a branch in the United Kingdom, Allianz Global Investors GmbH, UK branch, 199 Bishopsgate, London, EC2M 3TY, www.allianzglobalinvestors.co.uk, which is subject to limited regulation by the Financial Conduct Authority (www.fca.org.uk). Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.
