Henderson head of multi-manager Tony Lanning has bought index-linked gilts for the first time in his £103m absolute return fund to protect against inflation.
Last week, Lanning bought the Royal London global-index linked bond, which now represents up to 3.5 per cent of the fund.
He says: “It is sensible to diversify because we are concerned about inflation. If inflation does take hold we will have protection.” Lanning adds that the Macquarie global infrastructure fund, which he has held since October 2008 and has a 3.5 per cent holding, will also do well in an environment of rising prices.
Lanning also bought a 3.5 per cent holding in the Thames River water and agricultural absolute return fund. He says: “Natural resources are in short supply but they are volatile. The market is now rewarding stockpickers.”
He adds the mandate on his fund allows him to “protect against every possibility”. He says: “If inflation does not take hold, there are other parts of the fund that will do well.”
Lanning says he is concerned that the wide range of products in the absolute return sector is confusing for investors. He says: “Absolute return funds needs to be categorised according to volatility. We hold 10 per cent in low equities which is low volatility – a high weighting in equities can lead to outperformance. Absolute return means different thing to different people but it is supposed to mean low-risk, incremental return.”