Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Pension Funds Shift Out of U.K. Index-Linked Gilts on Valuation

Sept. 10 (Bloomberg) -- U.K. pension funds are seeking alternatives to index-linked gilts for inflation-protected cash flows as the securities have become expensive, according to consultancy JLT Employee Benefits.

The funds are diversifying into assets such as infrastructure and property projects to meet long-term obligations to retirees, Julian Brown, director of investment consulting at JLT in London, said in an interview.

“Index-linked gilts are very expensive and they are giving you negative real yields,” Brown said at a conference run by the National Association of Pension Funds, whose members have combined assets of nearly 900 billion pounds ($1.41 trillion). “Corporate index-linked bonds are available but they are also expensive if you take into account credit risks,” he said.

Ten-year index-linked gilts have yielded less than zero since September 2011. The rate was at minus 0.24 percent today after declining to a record minus 1.64 percent on April 5. A negative yield means investors who hold the security until it matures will receive less than they paid to buy it.

“Infrastructure investments provide an inflation-protected alternative that investors are looking for,” Brown said. “They might not be as liquid as bonds but if you are a long-term investor liquidity might not matter that much.”

To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.