XTrackers Global Inflation-Linked Bond UCITS ETF 5C

Issuer: Xtrackers

Asset Class: Fixed Income

TER: 20bps

Trading Currency: GBX

Pays Income: False

Listing Date: 31 Oct 2013

Ticker: XGIU

ISIN: LU0908508814

This fund offers exposure to global inflation-linked bonds (ILBs), which are government-issued securities specifically designed to protect investors from the erosive effects of inflation. Unlike conventional bonds, the principal and/or interest payments of ILBs are adjusted in line with changes in a consumer price index. This mechanism helps to preserve the real value of an investment, ensuring that purchasing power is maintained over the long term. In an economic environment characterized by rising price levels, the real returns of traditional fixed-income assets can diminish. ILBs, therefore, serve as a crucial portfolio hedging tool, providing a direct and efficient way to safeguard capital against inflation risk.

The investment strategy is to passively track a global index of government inflation-linked bonds from various developed countries, including the United States, the United Kingdom, France, and Japan. This global diversification mitigates country-specific risks and allows investors to capture different inflation dynamics across major economies. A key feature of this fund is that it is currency-hedged. This process aims to minimize the impact of foreign exchange rate fluctuations on the portfolio's returns, providing investors with a purer exposure to the performance of the underlying inflation-linked assets without the added layer of currency volatility.

This fund is particularly suitable for investors seeking a defensive component for their portfolio, especially those concerned about a rising inflation outlook or desiring stable, real returns. It can act as an effective diversifier, as ILBs often exhibit a low correlation to other asset classes, such as equities, particularly during periods of economic stress. As this share class is capitalising, all income generated by the underlying bonds is automatically reinvested back into the fund. This process facilitates long-term capital growth through the power of compounding, making it an appropriate choice for those with a long-term investment horizon.