Trustnet Magazine 89 November 2022 | Page 60

Performance of funds vs sectors
SECTOR PROFILE

Performance of funds vs sectors

Name 1yr (%) 3yr (%) 5yr (%) 10yr (%)
Royal London UK Government Bond
-20.6
-19.9
-11.4
3.1
Allianz Gilt Yield
-23.4
-22.9
-13.8
1.6
IA UK Gilts
-22.1
-21.7
-12.4
5.4
Vanguard UK Inflation-Linked Gilt Index
-33.6
-26.2
-16.7
27.2
IA UK Index Linked Gilts
-34.3
-24.8
-16.2
26.5
Source : FE Analytics
the asset price has been dictated more acutely by duration .” Dishner adds that the poor performance of index-linked gilts in 2022 so far can be partly explained by the fact they were already priced for high inflation . “ Ten-year breakevens were around 4 % to start the year ,” he says . “ So , while near-term inflation has been higher , the market is taking the view that some combination of 1 ) central bank policy , 2 ) slower growth , and / or 3 ) energy issues will be resolved in the medium term . This can be seen in the relative outperformance of two-year index-linked bonds versus 10-year linked ones .”
Darkest before dawn ? The UK is not the only developed market to suffer : Rush notes global government bonds have only fallen further in three years since 1701 . “ The speed at which these movements have taken place shows how seriously bond investors have taken changing inflation expectations ,” he says . While this may make for depressing reading , Rush notes these assets are now trading at yields that make them more attractive to investors in an environment of persistent inflation . “ We believe they will remain higher for longer , though outside of the double-digit inflation figures we have seen this year ,” he says .
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