The Royal London Global Index Linked Fund aims to provide a return in excess of 1 per cent relative to its benchmark of the Barclays World Government Inflation-Linked Bond Index (hedged back to sterling), over a three-year period, gross of fees.

James Davies, investment research manager at Chartwell Investments, reviews the product.

'One of the big economic debates of today is the extent and timing of any inflationary pressure. For what it’s worth, I’m an inflationist, viewing history as a better rulebook to what’s going to happen than economic theory. That said, much of the debate really centres on when, not if, inflation will become a problem for the UK.

'Only an advocate of long-term deflation – and there aren’t that many – would deny that inflation is a real danger at some point in the next few years. Government securities are traditionally viewed as the most secure forms of investment. One of the problems with holding bonds, however, which offer a fixed interest payment (coupon) and return of capital upon maturity, is that inflation erodes not only the value of the capital, but also the worth of
the income.

'Consequently, incorporating some index linking (inflation linking) into your portfolio of bonds makes sense in most economic environments if it is to be truly diversified, particularly when the future is so uncertain.

'Royal London has a well-established fixed interest team, particularly when it comes to eking out an active return from government bonds. The global remit of this fund, combined with the flexibility to hold non-index-linked issues and investment-grade corporates (maximum of 30 per cent in non-index-linked bonds), makes the fund quite attractive for investors looking to get genuine diversification within their government bond allocation.

'While many increasingly favour strategic bond funds, where the call between bond types is away from you, many investors still want to be able to have their own views reflected within their portfolios.For those looking for inflation
protection for their bond portfolio or greater portfolio diversification in general – as opposed to pure returns – this fund is worth consideration.'