Bestinvest says
Global inflation linked mandates enable the fund manager to take advantage of discrepancies in bond valuations worldwide, an opportunity not available to dedicated UK index linked gilt funds; the latter also tend to be more expensively priced due to domestic pension fund buyers. This Fidelity fund is deliberately structured around a shorter maturity benchmark, making it less sensitive to changes in real yields and more sensitive to changes in inflationary expectations. The fund suits investors looking to protect their portfolios from inflation.
The manager's inflation views are expressed mainly via sovereign index linked bonds. Inflation SWAPs (essentially a pure inflation play with no real yield risk), index linked corporate bonds, conventional sovereign bonds and yield curve derivatives will also be used to a lesser degree. The manager predominantly adds value from three buckets: interest rate positioning (duration), break even and cross market relative value trades. The global nature of this portfolio tends to result in lower volatility of returns relative to funds focusing solely on the UK index linked gilt market, as well as potentially offering the benefit of securing cheaper inflation protection. The duration of the benchmark is about 5 years - approximately half that of an all maturities global inflation linked bond index. Fund returns are predominantly in the form of capital.