The ILBI Exchange Traded Fund (ETF) is a product that provides investors with a convenient and cost-efficient way to get exposure to performance of de facto SA Government inflation bond benchmark index.
The Barclays/Absa South African Government Inflation-Linked Bond Index is a total return index comprising SA bonds issued by the South African government that are linked to the South Africa Consumer Price Index (CPI).
Inflation linked bonds differ crucially from conventional bonds in that the nominal value of the notional changes in line with the South Africa CPI. Thus the real value, not the nominal value, of the bond’s notional remains constant. As coupons are expressed in terms of the notional, they too increase in line with the CPI.
On a monthly basis all coupons received are reinvested into the fund so as to increase the net asset value of the portfolio and consequently increase the value of each unit.
The ILBI ETF is suitable for investors seeking low-cost convenient alternatives to traditional non-listed products. The ILBI ETF can act as a building block for investors to use when constructing their own portfolios.