OP-Inflation-linked Bond

Among OP's three government bond funds, OP-Inflation-linked Bond focuses on inflation-linked fixed-income instruments and offers a rational way to manage the inflation risk exposure of the investor's fixed-income portfolio.

OP-Inflation-linked Bond Fund is a long-term bond fund that mostly invests in inflation-linked fixed-income instruments issued by governments, other public-sector entities and credit institutions in the EEA. Inflation-linked fixed-income investments differ from traditional bonds in that the capital and coupon of the investments are adjusted for the realised inflation rate, which means that the investments maintain their real value. When inflation accelerates, the fund thus offers a higher expected yield than that of traditional long-term bonds.

Due to the fund's long-term interest rate profile, the most significant risk with respect to the fund’s value performance relates to rising interest rates. When interest rates rise, the fund's value falls. Another key risk relates to inflation. For inflation-linked bonds like those used in the OP-Inflation-linked Bond fund, the yield potential increases when inflation accelerates but, correspondingly, when inflation expectations fall their interest income will drop below that of traditional long-term bonds . The fund aims to hedge investments in non-euro currencies against exchange rate risk.

Bond funds specialising in government bonds are suitable for investors who want to use fixed-income investments for lowering their portfolios' total risk. Inflation-linked bonds offer high yield potential particularly when inflation accelerates. This fund is mainly recommended to an investor who intends to redeem his/her units after three years at the earliest.

Read the portfolio manager's review on the fund's Finnish pages.

OP-Inflation-Linked Bond Fund is a long-term fixed-income fund investing its funds primarily in bonds issued by EEA and OECD member states and other public sector entities. This means that the fund seeks to achieve returns in real terms in spite of inflation. The Fund invests primarily in countries such as Australia, Sweden, Germany, Canada, France, New Zealand, Great Britain and United States.

The fund’s investments are primarily made through direct bond investments, but the fund may also use derivatives to hedge against market fluctuations and to replace direct investments. Typically the fund invests its assets in issues of about 20-50 companies, but this number may vary reflecting the views taken by the portfolio manager. The Fund seeks to hedge any foreign exchange risk related to non-euro investments.

The modified duration of the fund, a measure of its interest rate sensitivity, is typically 8–13. This indicates the negative NAV impact on the fund in terms of percentages, if the interest rate level rises by one percentage point. As the level of interest rates decreases, the NAV of the fund increases accordingly. The issuers must have long-term ratings of at least AA- or comparable. The Fund’s portfolio management makes investment decisions based on the market view prevailing at the time. Portfolio management’s analysis of the market view relative to the prevailing interest rate level and inflation expectations is emphasised in particular in the Fund's investment decisions.

The Fund’s benchmark index is a combination of several indexes. The composition of the benchmark index is described in the fund prospectus. With active investing, the Fund seeks to outperform its benchmark index in the long term. The Fund mainly takes notable active risk and it may differ significantly from the composition, weights and risk level of the benchmark index.

The Fund promotes environmental and social characteristics and, to ensure it, uses environmental, social and governance (ESG) analysis and excludes certain investments. 

Negative screening: the Fund excludes countries with significant adverse impacts on society from its investments. The Fund does not invest in excluded countries, and if an investment product of the Fund later falls within the scope of the exclusion, the aim is to terminate the investment within a reasonable time period.

Use of ESG data in the analysis of investments: The average values of the sustainability indicators of the Fund’s investments are regularly monitored. The values of the indicators are considered when making investment decisions, and the average values of the portfolio and their development in relation to the benchmark index are monitored.

The investment process of the Fund includes analysing the creditworthiness of the investment products. In analysing creditworthiness, environmental and social characteristics as well as good governance are considered, among other factors.

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  Saver: €0/month (normally €2.99/month)
  Investor: €9.99/month (normally €14.99/month)
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