UK government bonds are down for the first time in three days this morning, optimistic that Greece is close to securing a bailout agreement. However, investors remain cautious as other factors such as the risk of an EU referendum could impact gilts.
A total of 30 funds sit within the UK Gilts sector in the Investment Association (IA) universe. The IA stipulates funds in this sector must invest at least 95 per cent of their assets in sterling denominated government-backed securities, with a rating the same or higher than that of the UK, with at least 80 per cent invested in gilts.
The best performing fund in this sector is F&C Institutional Retirement Annuity fund, which returned £1,159 on an initial investment of £1,000 over a one-year period to 22 June, according to FE data. The £6.9m fund aims to generate performance in line with the FTSE Actuaries British Government over 15 years gilt index. The fund invests 99.11 per cent in UK fixed interest and its top holding includes a Treasury gilt with a 4.25 per cent coupon.
This is followed by Vanguard UK Long Duration gilt index which returned £1,158 over a one-year period. The £98m fund seeks to track the performance of the index and has its top holding in a Treasury gilt with a coupon of 3.25 per cent.
Royal London Short Duration Gilts is the worst performing fund over a one-year period. The fund, managed by Craig Inches, has 88 per cent invested in gilts, with the remainder in global corporate fixed interest and UK index-linked gilts. The fund’s top holding is a 4.75 per cent Treasury. It returned £1,015 over a one-year period.
It is interesting to note that while the top performers are overweight on gilts with higher coupons such as 3.25 per cent, the bottom five tend to hold gilts with lower coupons such as between 1 and 2 per cent.
| Best And Worst UK Gilts Funds, One Year To 22 June 2015 | |
| Top 5 | |
| F&C Institutional Retirement Annuity | £1,160 |
| Vanguard UK Long Duration Gilt Index | £1,159 |
| Schroder Institutional Long Dated Sterling Bond | £1,152 |
| Newton Long Gilt Exempt | £1,147 |
| F&C Fixed Annuity Conversion | £1,136 |
| Bottom 5 | |
| Royal London UK Government Bond | £1,063 |
| Henderson Inst UK Gilt | £1,063 |
| CF Canlife UK Government Bond | £1,055 |
| SJP Gilts | £1,039 |
| Royal London Short Duration Gilts | £1,015 |
| Figures as of 22 June 2015. Source: FE | |
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