Smith and Williamson reduces global index-linked bonds

The Smith and Williamson managed portfolio service team has reduced its exposure to global index-linked bonds (Sanlam Global inflation-linked and AXA Sterling index-linked).

The firm said this move is aimed at creating a “more equal weight position in its defensive, defensive income and balanced income models” and was driven by in-house guidance on the asset class.

The sale proceeds from this trade have been reinvested into a combination of short-dated gilts (iShares 0-5 Gilts) and short-dated credit (AXA US Short Duration High Yield and Artemis Corporate Bond) in the defensive, defensive income and balanced income models.

James Burns, co-manager of Smith and Williamson MPS, said: “The house view is that there are significant levels of inflation expectations being priced into index-linked markets which sets a high bar for the asset class to continue performing so well.

“There is also the challenge that as base interest rate expectations rise the price of gilts go down and this impacts index-linked bonds in the short-term.”