Investing in an Inflationary Environment

By Jessica Rusit, Associate Director – Investment Strategy Group,?FIIG Securities

With the March quarter headline inflation at 5.1% YoY, not all asset classes can keep pace or provide portfolio protection against rising prices; term deposits, for one, are on average returning well below this.?

Wealth erosion and savings depletion is a major risk for investors in an inflationary environment. Inflation-linked bonds offer protection by keeping cashflow paid to investors in step with the rate of inflation.

There are two types of inflation-linked bonds, which include Capital Indexed Bonds (CIBs) and Indexed Annuity Bonds (IABs). We believe these bonds should be a core holding of every portfolio and provide a stable income stream, adjusted for inflation each quarter.

These types of bonds are issued by high-quality infrastructure assets such as Sydney Airport, Royal Women’s Hospital and JEM NSW Schools.

If you'd like to learn more about Capital Indexed Bonds (CIBs) and Indexed Annuity Bonds (IABs), you can read more in our Wire publication by clicking here.?