While he cautions that anything with longer duration would produce negative returns should real and nominal rates bounce back quickly, he continues to believe that inflation protection is necessary.
“Having exposure to break-even spreads without the exposure to duration is an interesting strategy for the next few months.”
For, Pinggera, the focus has instead been on real assets, including student accommodation and broad infrastructure funds because they have an inherent link to inflation, while at the same time diversifying the portfolio.
Quliter Cheviot senior investment manager, David Miller agrees that inflation is likely to pick up as a result of the recent sterling weakness, is also of the view that there are a number of disruptors across a variety of sectors waiting in the wings should incumbents attempt to push up prices.
He is, however, also of the view that diversification is the key to navigating the medium term.
“While inflation is a corrosive influence on returns we tend not to buy structured products and derivatives in order to mitigate it because even if such products are cheap right now, they remain a cost. And, if we get moderately higher inflation that remains within the bounds of control, then by actively managing a diversified portfolio one should be able to mitigate any ill effects,” he said.
