We don’t really look at inflation in a very deep way. Just looking at our liabilities and trying to match them are probably much more important to us. SIMON MUMME: Today we are contrasting the merits of active and passive ways of managing inflation. What are some of the risks in passive inflation-linked bond strategies? KENT WILKES If you look at the traditional approach that’s been taken, which in Australia is typically people running to a benchmark like the UBS Aggregate inflation benchmark. That has a duration of about nine years, and also has a lot of interest rate risk, which is a key risk. We’re at a low point in the cycle, in which most people think yields are probably going to be higher in the next two years or so. So with nine years duration risk, for every 100 points that yields move higher, you’re losing a lot of capital. So that’s the key risk. There’s also the moral hazard issue. For instance, when a new bond is issued in the market, people who follow a benchmark have to invest in it because if they don’t, they produce a higher tracking error. We advocate being benchmark unaware, and making sure that you break down inflation risk and interest rate risk and be look at them in terms of how can you achieve a real rate return in the portfolio.