The fixed interest class includes both gilts and corporate bonds. Gilts are issued by the British Government and are considered one of the safest forms of investment. This asset class provides balance to a portfolio and offers good diversification from equity markets but returns are generally more modest. The biggest influence on returns from Gilts and Fixed Interest funds are changes to interest rates and inflation. Increases in either inflation or interest rates will usually lower the returns whilst reductions will improve returns. Some gilts are Index linked and can benefit from inflationary increases.

We are currently studying the upward trends of UK interest rates to check the effect on returns from Gilts & Fixed Interest Funds. We will report to you on our conclusions very shortly.