Improvements in the domestic economy could have an impact on the UK gilts market. With output expanding at 0.8 per cent in the third quarter and many believing the drop in gross domestic product from pre-crisis levels will stabilise next year, this does not make for a promising forecast for gilts.
This would somewhat imply that gilts are currently performing well, but a look at the UK Gilts sector shows that is not the case. There are 28 funds in this IMA sector, none of which returned an initial investment of £1,000 over the past year. Even the best five-year figures are a little uninspiring, with £1,307 back on an initial £1,000 investment to Newton Long Gilt Instl Acc.
Over a shorter time period, it is the M&G Gilt & Fixed Interest Income A Inc that performs the best, although that is relative. A return of £967 on £1,000 is not going to be what any investor is looking for, even if it is the best in its sector.
Right at the bottom of the table is Henderson Instl Long Dated-Gilt, which returned a fairly disappointing £921 over the past year and £1,249 over five years. The benchmark is the Citi UK GBI USD, and only one fund outperformed this, by just £1. Essentially, when a sector average is not returning an initial investment over the past year, it is not going to be a particularly attractive prospect for investors.
| Top And Bottom UK Gilt Funds Over One Year Based On An Initial £1,000 Investment | |
| Top 5 | |
| M&G Gilt & Fixed Interest Income A Inc | £967 |
| St James’s Place Gilts L Acc | £965 |
| Allianz Gilt Yield A | £963 |
| Vanguard U.K. Government Bd Idx GBP Acc | £961 |
| SLTM UK Govt Bd Acc | £960 |
| Bottom 5 | |
| Henderson Instl Long Dated-Gilt A | £921 |
| AXA Sterling Long Gilt R Gross Acc | £921 |
| Vanguard U.K. Long Dur Gilt Idx Acc | £937 |
| Schroder Instl Long Dated Sterling Bd I | £940 |
| Newton Long Gilt Instl Acc | £945 |
| Sector Average | £959 |
| Data one year to 2 December 2013. Source: Morningstar. Copyright: Money Management. | |
