Which gilt index fund?

andiogris

Hi,

Reluctantly, I have decided to put a small proportion of my ISA into gilts. I was looking at the HSBC UK Gilt Index fund, L&G All Stock Gilt Index fund and Blackrock UK Gilt All Stocks Tracker fund and am struggling to decide which one to choose. On the face of it they are all fairly similar. They are all "clean", they have roughly similar TERs and all appear to track the same index. However, their yields vary hugely. HSBC's is 3.3%, L&G's 2.5% and Blackrock's 2%. Is there something I'm missing? And which one would you recommend?

Thanks!

P.s. Not keen on the Vanguard version as I want to diversify my holdings a bit.

kidmugsy

Why buy a fund rather than just buy a gilt?

Linton

If you look at the annual total returns they are pretty close. As a guess it could be the data was updated at different times or maybe they can release different amounts as income, I dont know whether that is allowed.

ChopperST

Very wary of gilts at the moment, using cash as that part of my portfolio at present.

andiogris

Thanks for the responses so far. I am aware of the current "unattractiveness" of gilts, hence the reluctantly at the start of my post. However, I will put a limited amount into my ISA because unlike cash ISAs I can easily rebalance gilt holdings with equity holdings.

Holding gilts directly is difficult because I aim to drip feed money into the ISA. Transaction costs will add up very quickly.

Any thoughts on which of the three you would go for?

ChopperST

My answer would quite simply be the one with the lowest cost relative to your platform.

kidmugsy

andiogris wrote: »

Holding gilts directly is difficult because I aim to drip feed money into the ISA. Transaction costs will add up very quickly.

Fair enough. My own thoughts in this direction have not been towards gilts but towards an ETF of short-dated corporate bonds.
For example http://uk.ishares.com/en/rc/stream/pdf/false/publish/repository/documents/kiid/kiid-ir-ish-ishares-corporate-bond-1-5yr-ucits-etf-gb-ie00b5l65r35-en.pdf

or towards an ETF of US TIPS e.g.
http://uk.finance.yahoo.com/q?s=TIP

In both cases I'd hope for a higher yield than from Gilts.