Wed, 09/04/2014 - 10:09
Russell Investments Canada has responded to the increasing portfolio de-risking needs of Canadian institutional investors by launching the Russell Inflation Linked Bond Fund.
The fund, which expects to invest primarily in inflation-linked bonds issued by governments of Canada, is designed to provide a stable level of interest income that is hedged against inflation.
Russell Canada has developed the fund in response to what it believes is a critical need in the Canadian institutional market. Canadian pension plans are taking advantage of strong funding levels to reduce the risk of future liabilities, often by implementing fixed income strategies, and they are looking for a variety of fixed income investment vehicles to help achieve desired investment outcomes.
"We are able to draw on three decades of experience in Canada and tap into Russell Investments' unique set of global investment competencies and resources to anticipate and respond quickly to the needs of the Canadian investor," says David Feather, president and chief executive officer, Russell Investments Canada Limited. "The environment is changing for Canadian investors, with dynamic risk management coming to the forefront after a few years of market growth and improving funding levels. This new fund is another example of our ability to combine local insight and global capabilities to offer a unique investment tool for clients."
Russell Canada believes this new offering will be of interest to Canadian pension funds and other institutional investors applying de-risking strategies to match future liabilities. The fund helps institutional investors address concerns about inflation risk, potentially improve funding levels and better hedge inflation risk to future retirement plan benefits. It will also be added as a portion of the allocation within the Russell Real Assets Portfolio, available to Canadian institutional and private client investors.
Russell Canada chief investment officer Greg Nott will oversee the fund as portfolio manager, while day-to-day portfolio management services will be provided by Kelly Mainelli, part of Russell Investments global fixed income team and based in the company's global headquarters in Seattle, Washington. Russell's global fixed income investment team is based around the world and collectively oversees more than CAD51bn in fixed income assets.
Nott says: "Unlike traditional core bonds, inflation-linked bonds provide inflation-adjusted income. Even in the case of well-diversified multi-asset portfolios, unexpected inflation can impact the returns and real income investors expect to receive over time. From a strategic perspective, it is important for investors, particularly those plans with an inflation component tied to their promised benefits or spending requirements, to consider some form of direct protection against inflation. The fund may be suitable for investors applying de-risking strategies and seeking to match their liabilities with an inflation-linked instrument to protect improved funding levels."
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