Troy Asset Management is standing by its large weighting in inflation-linked bonds, in spite of the adverse effect of the investment on the Troy Spectrum multi-manager fund during May and June.
The £82m fund lost 4.2 per cent between May 1 and July 1, compared with a 1.2 per cent loss from the FTSE All-Share index and a 1.1 per cent rise reported by the MSCI World index.
In the fund’s latest update, the management team stated that holding inflation-linked bonds had been “like holding a knife at a gun fight”, due to the fund’s “sizeable” investments in the CG Dollar fund and CG Real Return fund, both portfolios of inflation-linked government bonds.
The Troy team’s statement said it agreed with CG managers Peter Spiller and Alastair Laing, who believe inflation will be the ‘cure’ for over-indebted government balance sheets.
“The one thing they cannot be certain about is the timing of the appearance of elevated inflation,” Troy said.
“It could come next week or perhaps in five years. We therefore, like them, need to treat our investment as a long-term affair.”