UK gilts funds must invest at least what percentage of assets in sterling-denominated government-backed securities?

• A. 80%
• B. 70%
• C. 95%
• D. 100%

Answer: (C)

UK gilt funds are restricted to keep the majority of their assets in sterling-denominated government-backed securities. The rule requires at least ninety-five percent of assets to be in these securities. This ensures the fund stays true to a gilt focus—minimising currency and credit risk associated with non-government or non-sterling assets—while allowing a small portion (up to five percent) to be held in cash or other permitted assets to meet redemptions and operational needs. If the requirement were 100%, it would be too rigid for practical liquidity; if it were lower, it would dilute the fund’s gilt exposure and undermine its mandate.