Specialist inflation funds proliferate in Europe

European funds specialising in inflation-linked products accounted for around 30% of all inflation-linked product end-users during 2004, according to ABN Amro.

Speaking yesterday at an inflation conference in Paris, Brice Benaben, head of inflation structuring at ABN Amro, said he expected the growth in the number of specialist managers to continue. "This, combined with the use of products for asset/liability management purposes and compliance with new accounting rules, will continue to see the market grow," he added.

In 2003, specialist funds only accounted for around 7% of European end-users, and the Dutch bank attributes their growth during 2004 to an increased desire among pension funds and others to manage inflation risk on the back of growth in retirement assets.

Specialist managers are increasingly turning to the inflation-linked swap market, the bank said. According to its research, swaps accounted for 21% of investment allocations in 2004; the figure was just 5% in 2003.