BLOG: Four funds to inflation-proof your ISA portfolio
Inflation is one of our biggest concerns right now. The increasing cost of living has put a huge strain on everyone’s finances, with the price of petrol, food, clothing and even second-hand cars soaring due to a combination of energy price hikes and global supply chain issues.
The Consumer Prices Index, which measures the average price of goods and services, rose to 5.5% in January – its highest level for almost 30 years – and is expected to rise further.
As well as meaning the money in your wallet needs to stretch further, inflation also means your savings and investments need to work harder. So, what can you do to improve your chance of earning a decent return in the current environment and cope with rising prices?
Here we take a look at four investment funds that might be worth considering if you want to inflation-proof your portfolio.
TIME: Commercial Long income
The aim of this fund is to provide a consistent income stream with some capital growth prospects by acquiring properties with long leases. These assets can include commercial freehold ground rents and commercial freehold property. Interestingly, around 94% of rent reviews are linked to inflation or have a fixed uplift, rather than being subject to open-market negotiation. The majority of the rent reviews are also upwards only. This helps to provide some degree of clarity over future income, which is useful in the current environment.
In their latest commentary, the fund’s managers Nigel Ashfield and Roger Skeldon pointed out that the portfolio doesn’t have any properties without tenants. “Increased levels of inflation remain a concern for investors, especially in a period where rental growth in many sectors of traditional commercial property remains uncertain but one of the key features of long income is the comfort provided by structured rent reviews,” they wrote.
Jupiter Gold & Silver
Precious metals are often regarded by investors as a hedge against inflation – and one way to gain exposure to this area is through the Jupiter Gold & Silver fund. Managed since its launch by Ned Naylor-Leyland, the fund can invest in gold and silver bullion, as well as gold and silver mining companies. The portfolio’s dynamic approach enables it to be positioned in a way that best suits the current market conditions. Against an ever changing backdrop, this can be attractive.
According to Jupiter, one of the reasons to allocate to gold and silver is for exposure to assets with the potential to perform in a more inflationary environment. Naylor-Leyland believes the current situation looks positive for the fund. “Firstly, the Fed is looking as hawkish as it can be,” he said in an update. “Secondly, market expectations of inflation halving in the second half of 2022 are as optimistic as one could imagine. Thirdly, the Ukraine conflict has not yet reached its endgame.”
First Sentier Global Listed Infrastructure
This fund aims to achieve an investment return from income and capital growth over the medium to long term, defined as being at least three years. It invests in shares of companies that are involved in infrastructure around the world – and is well diversified in terms of sector and country exposure.
The industries covered include utilities (water and electricity), highways and railways, airports services, marine ports and services, as well as oil and gas storage and transportation.
The fund has been managed since launch by Peter Meany, who is a respected pioneer in the world of infrastructure investment. In a recent update, he highlighted the fund’s investment in a range of global listed infrastructure assets including toll roads, airports, railroads, utilities, pipelines, and wireless towers. “These sectors share common characteristics, like barriers to entry and pricing power, which can provide investors with inflation-protected income and strong capital growth over the medium-term,” he stated.
BlackRock World Mining Trust
The stated aim of the trust is to provide a diversified investment in mining and metal assets worldwide that’s actively managed to maximise total returns. In addition to investing in quoted securities, it can also invest in royalties derived from the production of metals and minerals, physical metals and unquoted securities.
The trust, which was launched back in the early 1990s, is co-managed by the experienced Evy Hambro and Olivia Markham. In an update published at the end of last year, the managers outlined the benefits of investing in the portfolio during the current environment. “We are also seeing inflationary data increase and commodities have traditionally been a core way for investors to both protect themselves from this but also benefit from such trends,” they wrote. They added that the best risk-adjusted opportunity was in the shares of mining companies in robust financial positions with strong balance sheets and high levels of free cash flow. “Mining companies are continuing to return capital to shareholders through dividends and buybacks.”
Juliet Schooling Latter, research director, FundCalibre