Table of Contents

Gilt Fund: What it Means and how it Works

By

澳洲幸运5官方开奖结果体彩网:James Chen

Updated June 28, 2023

Reviewed by

JeFreda R. Brown

Fact checked by

Katrina Munichiello

What Is a Gilt Fund?

Gilt funds are investment vehicles comprised of gilt securities. Gilts are the U.K. equivalent of 澳洲幸运5官方开奖结果体彩网:U.S. Treasury securities.

Gilt funds can be ETFs or mutual༒ funds that invest in U.K. government bonds with the conservative objective of preserving capital. Gilt funds invest in short-term, medium-term, and long-term g⛄overnment securities.

Key Takeaways

Gilt funds are pooled investment vehicles like ETFs or mutual funds that hold British government bonds.
Like U.S. Treasury funds, gilt funds are utilized in the U.K. and British territories in the Commonwealth.
Gilt funds are conservative, low-yield investments that carry low risk.

Who Invests in Gilt Funds?

Gilt funds are British 澳洲幸运5官方开奖结果体彩网:fixed-income investments. Gilt funds🐬 are constructed for the conservative investor looking for🃏 a low-risk strategy.

Although gilt funds contain government-issued debt securities, they may include company stocks or corporate b🦂onds. In the U.K., high-quality, low-risk blue chip stocks or bonds are known as gilts or gilt-e🍨dged securities.

Types of Gilts

U.K. gilt securities take three foℱrms: convent🎀ional gilts, index-linked gilts, and strips.

Conventional gilts: A conventional gilt issued by the U.K. government pays semi-annual coupon payments on the debt. U.K. gilts are issued with five, 10, 30, 50, or 55-year maturity.
Index-linked gilts: An index-linked gilt is similar to a Treasury inflation-protected security. These gilts have rates and principal payments linked to inflation. Investors receive varying coupon payments every six months based on the inflation rate.
Strips: Strips are gilt securities based on either the coupon of a debt security or the principal payment.

Tip

The United Kingdom Debt Management Office publishes a Quarterly Review, which shows the current breakdown of the gilt market by type of gilt and how it has evolved.

Examples of Gilt Funds

iShares Core U.K. Gilts UCITS ETF: Invests in U.K. government securities. As of June 16, 2023, 99.92% of the portfolio was in U.K. Government bond investments. The fund's return in 2022 was -23.8% in British pound terms.
Janus Henderson Institutional U.K. Gilt Fund: Invests primarily in U.K. government Gilt securities. One-year performance in the fund’s investor share class was -17.26% in British pound terms as of June 16, 2023.

What Are Some Advantages to Investing in Gilt Funds?

Gilt funds are best for investors when interest rates in the economy are declining, and the investment horizon is at least three to five years.

Where Do Gilt Mutual Funds Invest?

By regulation, gilt funds must invest at least 80% of their money in debt instruments issued by the government.

How Do Investors Purchase Gilt Funds?

Investors can invest in gilt funds through Gilt-edged Market Makers (GEMMs), the primary dealer in gilts, and actively trade in conventional gilts, index-linked gilts, or both.

The Bottom Line

Gilt funds are 澳洲幸运5官方开奖结果体彩网:investments like ETFs or mutual fu𝔉nds comprised mainly of British government bonds. Like U.S. Treasury funds, gilt funds are conservative, low-yield, low-risk investments. Investors cꦜan invest in gilt funds through Gilt-edged Market Makers (GEMMs).

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