Its down 4% today, same as the FTSE 100. Why is this - can somebody explain who is more knowledgable than me please?

Not that this is in the least bit of use to you, but I am wondering exactly the same. Have got 50% cash, 25% FP Index Linked NGP, 25% BGI Index linked blah de blah.

Reading the descriptions of these funds you would think these funds would be fairly immune from the recent falls - obviously not.

If the Govmnt starts making bad decisions with (our) money will these funds fall further still??

Now wondering if i should move 100% cash ...

sorry - just seen we've already had a similar dscussion elsewhere

Did we? Where?

Anyone? My Index Linked Gilts fund is falling in value, will it recover? Whats the outlook for gilts in times like this?

Index linked gilts have been falling as the outlook for inflation has changed completely. Compare this to fixed interest gilts that have jumped in value (due to flight to quality AND expectations of rate cuts. The outlook now for either form of gilts depends where you see this mess going, worsening sentiment with low inflation would be good news for fixed interest gilts, high inflation is good for index linked gilts.

If the worse news is through stock markets will likely recover & gilts may fall. Crystal ball anyone?

Cash fund maybe your best bet if you are a low risk investor.

Gilts are likely to preserve their value reasonably well under all forseable market conditions (save default of the UK government, or catastrophic deterioration in government financing).

However, like all non cash investments, there is a degree of volatility in price. Index-linked gilts derive most of their return from inflation. With the threat of high inflation, they have therefore commanded a high price (and therefore a low yield) as the inflation component has fueld demand. By contrast, in a low inflation environment, or even deflationary environment, their yield will fall, and therefore there is less desire for these, and they command a lower price.

Perhaps you should regard buying IL gilts as store of wealth, rather than cash - in the event of high inflation, you are protected. In the event of deflation or low inflation, although your nominal returns may be low or even negative, you should see a slight rise in purchasing power.

Bear in mind that the IL gilts have only dropped in the low single figures - stocks have dropped nearly 20% in the last few months.

I've kind of hdeged my bets a bit buy buying some fixed income government bonds (mixture of governments and currencies) and some index-linked gilts.