Axa Investment head urges advisers heed portfolio inflation risk

Advisers should be aware of potential inflation risks affecting portfolios, with a gradual increase in break-even inflation rates on the cards, Chris Iggo has warned.

The chief investment officer of fixed income at Axa Investment said: “We still see longer-term inflation risks, given that break-evens are still below the desired central bank inflation rate of approximately 2 per cent for the Consumer Price Index. This is true for the US and the eurozone, and for the UK.”

The policy was determined to deliver inflation at target and Mr Iggo said the likelihood was that there would be some modest overshooting as a result.

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“So having exposure to inflation protection remains a core part of our fixed-income investment strategy,” he added.

Adviser View

Natalia Lingiah, financial planner at Staffordshire-based Intelligent Wealth Management, said: “We always look at a portfolio’s long-term returns and would always estimate what inflation would likely be and factor this in.

“This means we are able to look at returns in today’s money which makes it more realistic for a client to see expected returns on a portfolio.”