What is a 'Gilt Fund'

Gilt funds are a type of British investment fund that invests in gilt securities. Gilts originated in Britain where gilt funds are primarily utilized.

BREAKING DOWN 'Gilt Fund'

Gilt funds are often known as one of Britain’s most conservative fixed income investments. The funds typically focus primarily on securities issued by the U.K. government called gilts. Gilt funds may also be found in India, which also issues gilt securities due to its historic designation as a British colony.

While gilt investments are primarily known to be government issued debt securities, they may also be offered by companies. In the U.K., high quality, low risk blue chip capital issuance of stocks or bonds may also be known as gilts or gilt-edged securities.

Gilt funds are primarily constructed with a conservative objective that includes investments with low risk. Similar to U.S. money market funds, they are a top investment for new investors seeking to earn returns slightly higher than traditional savings accounts. They most often invest in several different types of short-term, medium and long-term government securities. Since gilts or gilt-edged securities are also issued by corporations, gilt funds may also be constructed with corporate debt or equity gilt securities.

U.K. Government Gilts

U.K. gilt securities from the government primarily take three forms: conventional 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 durations of five, 10 and 30 years. Some U.K. gilts may also be issued with a 55 year maturity or an undefined 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 component of a debt security or the principal payment. They strip an issued debt security into two parts for an investor.

Gilt Fund Investments

Gilt funds are offered by numerous investment managers across the investable market. Below are a few examples.

Henderson U.K. Gilt Fund

The Henderson U.K. Gilt Fund invests primarily in U.K. government gilt securities. It is managed by Janus Henderson. One year performance in the Fund’s investor share class was 2.10% as of December 1, 2017.

iShares Core U.K. Gilts UCITS ETF (IGLT)

The iShares Core U.K. Gilts UCITS ETF invests in U.K. government securities. As of December 1, 2017, 99.92% of the portfolio was in U.K. Treasury investments. One year return for the Fund as of October 31, 2017 was 0.51%. 

RELATED TERMS
  1. Gilt-Edged Securities

    Gilt-edged securities are high-grade investment bonds offered ...
  2. Fixed-Interest Security

    A fixed-interest security is a debt instrument such as a bond, ...
  3. Venture Capital Trust - VCT

    A venture capital trust is a type of publicly listed closed-end ...
  4. Treasury STRIPS

    Treasury STRIPS are an acronym for 'separate trading of registered ...
  5. Index-Linked Bond

    An index-linked bond is a bond in which payment of income on ...
  6. Guilt-Edged Investment

    A guilt-edged investment is legal but perhaps not ethical. Such ...
Related Articles
  1. Investing

    Government Bonds: Is 2016 the 'Year of the Bull?' (IEF)

    A report published by Morgan Stanley Sunday predicts that 2016 could be the "Year of the Bull" for sovereign debt in the U.S., Japan, the eurozone and Britain.
  2. Insights

    Odds of European Brexit Rise After Terror Attacks

    Tuesday's terror attacks in Brussels have seen the odds of a British exit from the European Union rise.
  3. Insights

    Bank of England Probably Will Ease Amid Brexit

    Carney says the economic outlook has deteriorated and some monetary policy easing with likely be required over the summer.
  4. Investing

    Introduction To STRIPS

    STRIPS provide an alternative form of bond for fixed-income investors who need definite cash flows at specific times. Read the article to find out how.
  5. Investing

    5 Reasons to Invest in UK Property Right Now

    Some investors are seeing this as a historic opportunity to buy UK property at bargain prices.
  6. Investing

    The Top 5 International Bond Funds for 2018

    There are thousands of opportunities available within the international bond market for investors wanting to diversify fixed income positions for 2018.
  7. Investing

    What's a Debt Security?

    A debt security is a financial instrument issued by a company (usually a publicly traded corporation) and sold to an investor.
  8. Insights

    The Markets Are Headed For a Crash: Odey

    Prominent bear says a car crash is looming in financial markets.
  9. Insights

    Brexit: Winners and Losers

    As post-Brexit discussions between the U.K. and Europe heat up, we analyze the ongoing winners and losers from these negotiations.
RELATED FAQS
  1. What is the difference between a gilt edged bond and a regular bond?

    A gilt edged bond is a high-grade bond issue. The term "gilt" is of British origin and originally referred to debt securities ... Read Answer >>
  2. Common examples of marketable securities

    Learn about marketable securities and the most common types of debt and equity securities, including common stock, bonds ... Read Answer >>
  3. How do I calculate a bond's modified duration using Excel?

    Understand the benefits of investing in a money market mutual fund, and learn why investors use this type of account in volatile ... Read Answer >>
Trading Center