Cents and Sensibility: the Inflation Guy Podcast
Ep. 122: The Role of Linkers in Portfolio Construction, with Chris Clothier
Sep 24, 2024
In this discussion, Chris Clothier, Co-CIO of CG Asset Management, shares his expertise on the role of inflation-linked bonds in portfolio construction. He delves into their advantages and risks, emphasizing how they provide inflation protection during economic downturns. The conversation also touches on macroeconomic trends reshaping strategies, the implications of globalization's end, and how historical connections to inflation can inform today's investing. Clothier’s insights are invaluable for anyone looking to navigate the complexities of modern finance.
57:44
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Quick takeaways
- Inflation-linked bonds protect against inflation while diversifying portfolios, ensuring investors maintain purchasing power and potentially outperform nominal bonds during high inflation.
- These bonds present an asymmetrical risk profile, offering significant upside potential in inflationary scenarios while providing a guaranteed return of the original investment during deflation.
Deep dives
Understanding Inflation-Linked Bonds
Inflation-linked bonds, often referred to as linkers, play a significant role in diversifying a portfolio. They provide protection against inflation, which is considered a major threat to investors' returns. These bonds work by adjusting their principal according to inflation rates, ensuring that investors maintain their purchasing power. Moreover, investing in these bonds can yield better returns than nominal bonds during periods of high inflation, especially since historical data indicates that nominal assets typically struggle in such environments.
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