Legal and General Investment Management, the UK-based asset management firm, has launched the new Legal & General Global Inflation Linked Bond Index Fund.

The firm said that the new fund has been launched in response to advisors’ desire to diversify the fixed income element of client portfolios and insulate their investments from the effect of rising global inflation.

The new fund will have an annual management charge of 0.2 per cent. 

The Legal & General Global Inflation Linked Bond Index Fund will track the Barclays World Government ex UK Inflation Linked Bond Index, which is comprised of inflation-linked bonds issued by governments from around the world, excluding the UK. To be included in the index, bonds must meet the minimum A- rating for countries in the G7 or eurozone or have a minimum AA- rating for other issuers, with bond returns linked to the local rate of inflation of each of the constituent countries.

"Global inflation-linked bonds are a useful diversification tool for investors’ portfolios with a different return profile to conventional government bonds and a significantly lower duration than index-linked gilts, which will make up the majority of most investors’ inflation-linked allocation in the UK. They are also an excellent way for investors to provide part of their portfolio with a degree of inflation-proofing," said Simon Pistell, managing director at Legal & General Investments.

Legal & General Investment Management’s index funds team will manage the fund, with Tim Beaven the named fund manager. The team will manage the fund using its in-house expertise, focusing on close index-tracking, whilst looking to maximise returns and minimise portfolio costs. In order to remove return fluctuations due to currency, the fund will track a sterling-hedged index, with the portfolio hedging back to sterling in the same manner.

Legal & General has £272 billion (around $422 billion) under management in index-tracking funds, as at 30 June 2013.