Strategic Gilt Fund

Key points

• The fund invests only in UK gilts. There is no corporate exposure of any kind.
• The fund utilises the Charteris process of writing options on the underlying portfolio, with the aim of enhancing the total risk-adjusted return of the portfolio and reducing volatility.
• The fund was launched on 8 December 2006 and is managed by Ian Williams of Charteris Treasury Portfolio Managers.
• Sector: IMA UK Gilts

Current views

Last month’s announcement of 0.1% positive quarter-on-quarter growth, after six quarters of contraction, speaks to the fragile nature of the UK economic recovery. We believe that the key to positive gilt demand in 2010 will be the weakness of the underlying economy.

Since January 1st, the FTSE 100 is down approximately 8% as many investors actively question the premise of the economic recovery. We expect there could be further retracement in equities and a much more stable gilt market than is currently built into most forecasts.

Regardless of the precise terms of the fiscal austerity package it will be challenging to rein in government spending, whilst simultaneously ending QE without inhibiting growth and risking a double dip back into recession. We do not expect the gilt market to collapse and believe that the market could surprise investors by performing better than anticipated.

– 5 February 2010