AUSTRIA – Austrian asset manager Erste Sparinvest has launched two inflation-linked bond funds mainly aimed at pension funds and institutional investors.

“We have targeted pension funds in particular and institutional investors in general” said Edwin Trieblnig, head of international bonds.

Erste Sparinvest, which has six million euros in each fund – dubbed Espa Bond Euro Real and Espa Bond USA Real - hopes to interest Austrian and European institutional investors of any size who are exposed or want to be exposed to inflation investments, Trieblnig said.

”We think the time is right for inflation investments,” he said. “Our institutional investors are aware of this asset class and next year the German Government will issue the first inflation linked bonds will be introduced to the German market.”

“That will be a breakthrough for the class in German speaking markets in general,” commented Trieblnig, who helped design the new products.

“Inflation linked_bonds is the only asset class that could fulfil moderate volatility and 100% secure investment requirements” he explained “other alternatives are either like equity or real estate investments are volatile or not very liquid.”

The product would also hedge against the risk of slow economic growth and relatively high inflation, or stagflation.

“If one thinks of asset allocation as a method of hedging against different macroeconomic conditions, then stagflation must be considered. Inflation linked bonds are by far the best asset class in such an environment,” Trieblnig said.

Espa Bond Euro Real, benchmarked against Barclays Emu HICP- Government, and Espa Bond USA Real, against the Citigroup US TIPS Index., have been developed over the last two years. Both were launched last week.

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