Axa IM Distribution fund underweight on conventional UK gilts

Axa IM fund manager Richard Marwood has maintained his underweight position on conventional UK gilts in the £808.2m Axa Distribution fund as he remains bearish on the asset.

In a normal investment environment the fund would allocate 35 per cent of the portfolio in index-linked gilts and 7 per cent in conventional UK gilts.

He says: “We have not been anywhere near 7 per cent in conventional gilts because they don’t look like good value to us.

“They are useful to have as a very liquid instrument that you can buy and sell, but they don’t have much fundamental attraction at the moment because the yields are very low.”

Marwood adds: “QE [quantitive easing] hasn’t been used in the index-linked market which is quite a good thing.

“Once that has happened, conventional gilts and index-linked gilts will trade in tandem with each other and the gap between the two will be driven by what people’s inflation expectations are and those have ticked up a little bit.”

Marwood says: “We are overweight in equities at the moment and we have just been moving back up to our mid point in index-linked gilts.”