Although UK inflation held steady at 3% in February 2026, there are concerns it could spike following conflict between the US, Israel and Iran, which shut the Strait of Hormuz and pushed energy prices higher.
Against this backdrop, Trustnet asked Rob Morgan, chief analyst at Charles Stanley, to build a portfolio designed to cope with stickier inflation.
Source: FE Analytics
Rather than having any funds dedicated to the bond market, much of which is vulnerable to rising inflation expectations, his approach to diversification was through cautious multi-asset funds as well as inflation-resilient sectors such as infrastructure and commodities.
M&G Global Dividend
Equity-income funds investing in good quality dividend paying shares can offer good inflation protection over long periods.
“Companies with strong pricing power that can weather the storm of higher input costs and a cautious end consumer could be in a good position to outrun inflation, increasing earnings and dividends,” Morgan said.
M&G Global Dividend is a fund with exposure to these types of companies and has an “impressive record” of increasing pay-outs to investors over the longer term. Morgan gave it the joint largest weighting in his portfolio at 20%.
Managed by Stuart Rhodes, the £2.7bn fund targets companies that increase dividends each year, with returns expected to come from a mix of income, dividend growth and capital appreciation.
While the strategy can lag during periods when low‑yielding growth stocks dominate, Morgan said it “covers a lot of bases” for investors seeking rising income from global companies.
FundCalibre analysts added that it offers welcome diversification for investors reliant on a narrow group of dividend payers.
The fund is in the first quartile for returns in the IA Global Equity sector over three, five and 10 years (to the end of March 2026), gaining 43.7%, 72.3% and 219% respectively.
Performance of the fund vs sector over 5yrs
Source: FE Analytics
JOHCM UK Equity Income
Morgan said that a UK-focused fund is an attractive option for investors seeking resilience against inflation, noting that UK companies remain cheap relative to history and their global peers. In addition, the UK market is home to strong large-cap companies in more defensive sectors.
Morgan added that UK equities offer “generous dividends well covered by earnings”, with low valuations as an additional buffer against inflation pressures.
As such, Morgan allocated 10% of the portfolio to the £1.9bn JOHCM UK Equity Income, “a strong option for UK exposure”.
Managers Clive Beagles and James Lowen seek out companies with strong fundamentals at an attractive price, which means “growth opportunities as well as relatively high starting yields”.
Last year, it was one of the five UK equity income funds which has pairing top-quartile relative returns with a yield above cash.
Top 10 holdings include BP, Barclays, Glencore and Lloyds Banking Group.
“The fund is managed using a disciplined approach that has been developed and refined over 20 years,” Morgan said.
It has posted first-quartile returns in the IA UK Equity Income sector over three, five and 10 years to the end of March 2026.
Rathbone Global Opportunities
To balance out some of the income and value tilt of the portfolio, Morgan allocated 15% to Rathbone Global Opportunities, a more growth-oriented strategy.
“It’s easy to forget that earnings growth among the fastest growing companies can overcome inflation – providing a fair price is paid for the shares,” he said.
That is the philosophy of this £3.3bn fund, which invests on a high-conviction, selective basis, aiming to strike a balance between taking risk and dampening the impact of economic shocks or stock missteps.
It has been previously suggested that the fund’s more growth-focused and adventurous investment approach could also work well when held alongside the more defensive Fidelity Global Dividend or Invesco Tactical Bond.
It is managed by FE fundinfo Alpha Manager James Thomson, with Sammy Dow as deputy manager, and invests in companies of all sizes but typically targets mid-sized growth companies in developed markets – avoiding emerging markets.
It also features on Fidelity’s Select 50 fund list.
“The downsides of the fund are the typically higher volatility of a more growth-driven philosophy and the key-person risk of a small management team,” Morgan noted.
Performance of the fund vs sector over 5yrs
Source: FE Analytics
FTF ClearBridge Global Infrastructure Income Fund
Infrastructure assets can also provide investors with steady income and often have a certain amount of contractual inflation protection built in, meaning they can potentially provide portfolios with an attractive, income-oriented return and welcome diversification.
Morgan allocated 10% of the portfolio to the £1.9bn FTF ClearBridge Global Infrastructure Income fund, which provides exposure to regulated utilities and user-paying assets such as transport infrastructure.
“Around 90% of underlying revenues in the portfolio are inflation linked, so the portfolio should be relatively resilient in a scenario of higher inflation,” Morgan said.
“However, it may be more challenged if economic activity drops off, particularly in respect of companies with ‘demand-based’ revenues, such as toll road operators and airports.”
Performance of the fund vs sector over 5yrs
Source: FE Analytics
Troy Personal Assets Trust
For its steady, less-volatile returns and resilience to inflation through its ‘wealth preservation’ mentality, Morgan allocated 20% to Troy Personal Assets.
The vehicle – which is one of only two investment trusts boasting an Alpha Manager and a top FE fundinfo Crown Rating of five – is co-managed by FE fundinfo Alpha Manager Sebastian Lyon and Charlotte Yonge. It has over 10% invested in gold bullion, 40% in equities and 50% in bonds.
“It is not likely to set pulses racing but it is the sort of resilient holding that could be considered as a solid foundation within a portfolio orientated towards inflation protection,” Morgan said.
However, as highlighted by both Morgan and RSMR analysts, the £1.7bn trust is more the tortoise than the hare and will lag in a bull market for equities.
Ruffer Investment Company
Another wealth-preservation option included in the portfolio is Ruffer Investment Company, which also combines global equities, bonds, currencies and gold – using derivatives to provide protection during market stress.
“The overall aim is to protect as well as grow over the long term, so the balance of different elements is designed to pay off in a variety of economic scenarios – persistent inflation included – rather than take too much risk in one area,” said Morgan.
With around 6% of its net asset value (NAV) directly exposed to the US dollar, fund selectors recently identified the trust as one which could also shield investors from the reserve currencies recent volatility.
In March, co-manager Jasmine Yeo told Trustnet the £920.3m trust had shifted its defensive positioning towards credit spread protection and yen exposure.
It is currently trading at a slight 1.6% premium to net asset value (NAV) as at 7 April 2026.
L&G Multi-Strategy Enhanced Commodities UCITS ETF
Morgan allocated the final 10% of the portfolio to the L&G Multi-Strategy Enhanced Commodities UCITS ETF, an exchange-traded fund (ETF) which tracks the performance of the Barclays Backwardation Tilt Multi-Strategy Capped Total Return index.
“Raw materials can be a significant cause of inflation and direct commodity exposure can offer a way to hedge against it in a portfolio to help bolster returns,” he said.
However, commodity prices can be volatile, Morgan said, making diversification essential.
He noted that the ETF is a “handy one-stop-shop covering precious and industrial metals, energy, livestock and agricultural commodities”.