The new Managed Income Portfolio Service offers four options: Core Income, Income Plus, Inflation-Linked and a Customised approach for investors with over $5 million to invest. Over the past fortnight we have introduced the Core Income and Income Plus options. This week, we profile the Inflation-Linked option
The Inflation-Linked Income Investment Program
This option seeks to build a portfolio of inflation-linked bonds that provides the investor with an inflation hedge.
The program differs from the Core Income and Income Plus options because the primary investment objective is to build and manage a fixed income portfolio that is focussed on managing inflation risks.
The table below shows more specific details of the portfolio including:
- minimum number of bonds,
- maximum modified duration,
- issuer and security concentration
- approved currencies
Inflation-Linked Program parameters
The figure above displays the parameters included minimum number of bonds, maximum modified duration, approved currencies and more detail for the Inflation-Linked Investment Program offered through MIPS.
Source: FIIG Securities
The team will seek to identify attractive inflation-linked securities in both the government and semi-government space, as well as opportunities in the corporate, financial institution and infrastructure sectors.
For a portfolio that seeks to provide some inflation protection, interest rates are a secondary focus when identifying suitable assets. Therefore, a higher level of modified duration* has been set for this investment program to take into account the long dated and/or annuity style characteristics associated with these securities.
The team will initially seek to identify the most attractive government and semi-government securities and then overlay this base portfolio with corporate, financial institution and infrastructure inflation-linked securities as they offer the strongest risk-adjusted returns
If you have any queries please contact your FIIG Representative or call our offices. Please also note that the Managed Income Portfolio Service is available to wholesale investors only with a minimum investment of $250,000.
Modified duration is a measure of the price sensitivity of a bond to interest rate movements. Typically, modified duration provides an estimate of how a bond will change in price for a 100 basis point (bps) or a 1% movement in interest rates.