How do inflation-hedging ETFs fit into a portfolio?

Using a Forward Perspective analysis of key macro factors, independent research house PureGroup explores how the Lyxor FTSE Actuaries UK Gilts Inflation-Linked UCITS ETF (among other core ETFs) are likely to fare in the face of rising inflation and interest rates in the coming year.

With February's UK Retail Price Index value at 3.2%, inflation has returned with a bang and is expected to persist for some time.  The Bank of England's latest forecast shows inflation (as measured by the Consumer Price Index) persistently above their 2% threshold until mid 2018.  Therefore, an allocation to inflation-linked fixed income products can assist in providing protection against the negative impact of inflation in the current environment.  PureGroup's analysis of the monthly returns of the FTSE Actuaries UK Index-Linked Gilts All Stocks index (representative of the Lyxor ...