Retail adapt inflation products

Inflation products are increasingly being adapted for retail distribution, broadening their appeal beyond the institutional space as investors seek new sources of investment return outside the realms of bonds and equities, according to Barclays Global Investors.

Ralph Segreti, Barclays’ global inflation-linked product manager, said: “We’re seeing, in the last six months, a large demand from institutional fund managers to use inflation in various forms of strategies, where they will be using inflation as a source of alpha on many of their portfolios.

“I think the retail market is in its infancy looking at these types of strategies using inflation, but certainly there is a much larger demand than ever across the board,” said Segreti.

He indicated that take-up within the retail sector was happening slowly, with financial planners looking at structured products with linkages to inflation, where the payout is either the best performance of either an equity index or inflation.

With a decline in the issuance of government bonds in Australia, and a lot of activity and interest in inflation products, he said, “There’s really a global discussion to be had down here with funds and with other investors”.

Barclays’ Australian team is in the process of adapting institutional-style inflation products for the retail sector and crafting the package for addition to existing portfolios.

There are three key ways funds are approaching inflation products: those looking to use inflation for diversification within portfolios, those looking to use it in swaps and those using the asset class in a search for alpha.

“Inflation products have been at the core of Barclays’ growth for the last 10 years, so we take it upon ourselves to really help develop the markets wherever we can,” said Segreti.