RPI change “the perfect time to review inflation protection in portfolios” – Willis Owen’s Lowcock
Investors should use this week’s impending review of how the UK’s inflation numbers are calculated to ensure they have sufficient protection from inflation in place, Willis Owen believes.
On Wednesday, the Government will announce whether or not it is replacing RPI, or the Retail Prices Index, for a switch to Consumer Prices Index inflation.
RPI is currently used to calculate lots of different costs, including rail fares and utility bills, and a cut would be welcome by most consumers. On the flip side, certain investments linked to inflation – including government bonds – could see yields fall, and thus provide holders with less income than before.
For investors, the changes mark the perfect opportunity to review their portfolios with one eye on inflation, according to Adrian Lowcock, Head of Personal Investing at Willis Owen.
“Inflation has been off investors’ radars for some time, but last month’s surprise jump was above expectations, and it could be a sign of things to come.
“Even if we get some relief from the changes to the way inflation is calculated into everyday expenses like train tickets, investors should be prepared for a potential rise in inflation over the medium and long-term as fiscal stimulus replaces lockdown measures.”
Lowcock said there are a range of funds which investors can use for a portion of their portfolio to protect against inflation.
“Some assets, including equities, bonds and commodities, can see prices rise much faster than inflation, or provide an income above inflation, and therefore they can be used in portfolios to offset its impact.”
Below, Lowcock identifies three such funds which can mitigate the impacts of inflation over the long-term.
M&G Global Macro Bond – The fund is actively managed by Jim Leaviss who can invest anywhere in the bond market. Leaviss combines his views on the global economy with stock selection. This flexible approach means he is able to respond to changes in inflation as and when necessary.
Blackrock Gold & General – Manager Evy Hambro looks to invest the bulk of the fund in gold assets and other precious metals. The focus is on quality companies and the portfolio has a defensive bias, whilst gold has a reputation for protecting against inflation over the longer-term.
Threadneedle UK Equity Income – Equities are able to perform well in a moderate inflationary environment. Manager Richard Cowell invests in companies with strong balance sheets and excellent cash flow. The focus on dividends means the companies are less sensitive to prices and more able to pass any inflationary impact on through their businesses.
Adrian Lowcock, Chris Tuite
Head of Personal Investing Director
Willis Owen MRM Communications
07849 846387 020 3326 9915
Notes to Editors
Willis Owen is one of the UK’s leading online investment service providers. Founded more than 20 years ago Willis Owen now has around £1bn of funds under management.
Willis Owen Limited is authorised and regulated by the Financial Conduct Authority.