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While gilts no longer offer an attractive yield, they still provide
protection in times of market stress
TRUSTNET
Allianz Gilt Yield has made 58.30 per
cent over the past decade compared
with gains of 64.78 per cent from
its IA UK Gilts sector and 68.69 per
cent from its FTSE Actuaries UK
Conventional Gilts All Stocks index
benchmark. It has an ongoing charges
figure of 0.54 per cent.
FACT BOX
MANAGER: Mike Riddell / LAUNCHED: 16/05/2002 / FUND SIZE: £2.3bn / OCF: 0.54%
CROWN RATING
PERFORMANCE OF FUND VS SECTOR AND INDEX OVER 10YRS
Allianz Gilt Yield IA UK Gilts FTSE Actuaries UK
(58.30%) (64.78%) Conventional Gilts (68.69%)
80%
70%
60%
50%
40%
30%
20%
10%
0%
Ja
-10%
bonds if he believes these are
undervalued relative to conventional
government bonds.
Parsons described Riddell’s process
as “prudent and stringent”, adding that
this is “underpinned by his longer-
term analysis of the prospects for the
UK economy and the gilt market”.
Square Mile Investment Consulting
& Research is also a fan of the fund,
awarding it an “A” rating. However, it
warned that because the gilt market is
relatively efficient, it can be difficult
for active managers working in this
area to outperform.
“That said, opportunities for
small additional returns do present
themselves both in the primary and
secondary gilt market,” it added.
“Once fees have been deducted,
any outperformance is likely to be
slim. However, we feel the considered
approach the manager employs is
likely to be of benefit to investors at
G
ilts have looked like a
relatively unattractive
investment ever since the
Bank of England cut interest rates to
0.5 per cent in the wake of the financial
crisis. Yet despite repeated warnings of
a bond wipeout over the past 10 years,
the FTSE Actuaries UK Conventional
Gilts All Stocks index has still made
gains of close to 70 per cent over this
time and while gilts no longer offer
an attractive yield, they still provide
protection in times of market stress.
This is why Andy Parsons, head of
investments at The Share Centre, has
recommended Allianz Gilt Yield as
part of a cautious portfolio.
The fund’s manager Mike Riddell
attempts to outperform his
benchmark by managing interest
rate risk and through allocations to
different bond maturities. He can also
expose the fund to off-benchmark
positions such as inflation-linked
certain times of the economic cycle,
for example during prolonged periods
of rising yields.
“At such times an active manager
should have an advantage over a passive
investor through his ability to manage
broad risks, such as interest rate risk, to
the benefit of the end investor.”
Allianz Gilt Yield
Source: FE Analytics
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