Wealth manager Arbuthnot Latham has grown its direct gilt service to £275mn of assets since launch in February 2024.
That works out at £14.4mn per month on average.
The £275mn number is more than 10 per cent of the total assets under management of Arbuthnot Latham’s wealth management business.
Eren Osman, chief investment officer at Arbuthnot Latham, said: “From a product perspective demand has been incredible.
“It exceeded expectations in the first year, and continues to attract new business, both from advisers on behalf of their clients, and from private clients.”
The service invests directly in gilts, excluding index linked gilts, and keeps the duration short as the aim is to minimise volatility.
Osman told FT Adviser there are three client types investing in the service, and that there is not much variance in the goals of the advised clients relative to the private clients
He said: “There are some clients that are already accustomed to investing but have some spare cash right now and are parking it in the service until they decide what to do, and want to do that in a tax efficient way.
“Then you have clients who aren’t very experienced at investing, maybe they have property, and using the gilt service is like a gateway to investing for them.
“The third group are those that have had a very significant liquidity event, for example, selling their business.
“They have come into a large amount of capital and want breathing space to work out what comes next to make a financial plan.
“A lot of entrepreneurs have had periods where they aren’t cash rich, and the suddenly they are and they want to plan for that.”
In the nineteen months since the service launched, Osman said there have only been three months where the return was negative.
While any profit made from an investment in gilts is exempt from capital gains, income tax is payable on the income received from a bond.
This means Arbuthnot Latham will, if two gilts are on the market with the same date to maturity, frequently buy the one with the lower coupon.
This is because the likelihood is the greater bulk of the future return will come from the capital gains, and so the tax bill for the client will be lower than if they bought the gilt with a higher coupon, as more of that return would likely come from the income.
Osman said investors looking at the gilt service need to be aware of the “opportunity cost” of investing in it.
“It is designed for clients who want to take little risk.
“This year to date, the average medium risk portfolio has returned 7 per cent, while our gilt product has returned 3.5 per cent. So clients need to be aware of what they are potentially giving up.”