Fund Objective

The Standard Life Investments Global Index Linked Bond Fund aims to provide long term growth from a combination of income and capital growth by investing predominantly in sovereign-issued and corporate inflation-linked bonds.

View on Past Performance

The credit crunch, and its subsequent economic events, continue to cause extreme volatility and significant dislocations in the markets. Commodity markets broke to the upside, with oil conclusively breaking the $100 per barrel mark. This caused US inflation-linked bonds to move sharply higher, although US bonds under-performed European bonds overall.The UK had a relatively poor month registering minimal gains. Elsewhere Sweden suffered in total return terms, despite weaker than expected inflation data. Australia moved inexorably toward another rise in official rates, with the economy buoyed by commodity prices.The Global Index Linked Fund returned 0.32% over the month, compared to the IMA sector average return of 0.41%. Geographic asset allocation helped performance, as did the average duration of the Fund. However, the weighting profile of long, medium and shortdated bonds was negative in February.We removed our longstanding overweight position in the US, also going underweight Japan. We used the proceeds to invest in core Europe, as we expect the European Central Bank to be forced into cutting rates later in the year leading European bonds to out-perform. Later we sold some short-dated French bonds to buy Swedish inflation linked bonds, taking advantage of an attractive valuation. We added a small holding in the reopening of the Network Rail 2027 issue.

Future Expectations

Market liquidity in government bonds is still poor, and in corporate bond markets almost non-existent. The credit crunch has a long way to go to work itself out, as positions have not been unwound and valuations are still not realistic in many obscure instruments. Coupled with this, with the US economy heading for recession and food and fuel price inflation not far short of rampant , risk markets will remain skittish at best.

Fund Details