By Davide Barbuscia
NEW YORK, May 19 (Reuters) - British fund manager Ruffer Investment Management is in talks with institutional investors to expand a recently launched U.S. investment vehicle it hopes will grow to $5 billion in assets over the next five years, according to a Ruffer executive.
Ruffer's biggest allocation is to inflation-linked bonds, Investment Director Jenny Renton said, and its long-held view that markets will have to navigate structurally higher inflation is appealing to U.S investors.
"The timing was good, our story was resonating, our fears about inflation and inflation volatility were resonating," Renton said in an interview on Monday.
Ruffer, which manages 26.2 billion pounds ($32.70 billion) in assets according to its website, launched a U.S. investment vehicle in January now worth $500 million, Renton said.
U.S. consumer prices have been rising at their fastest pace in decades in recent months, prompting the Federal Reserve to hike rates and reduce its balance sheet to cool the economy. This shift in its previously accommodative monetary stance has been weighing heavily on pretty much all asset classes in financial markets this year.
"Our core structural view that we have held for some time is that we're moving into a period of higher inflation with yields below the rate of inflation," Renton said.
"More importantly, in the short term, we're going to see inflation volatility," Renton added.
As global central banks rapidly withdraw stimulus measures, liquidity in financial markets has deteriorated this year, even in the $20 trillion U.S. Treasury market, contributing to wild intra-day yield swings.
"Central banks will be unable to tighten conditions to bring inflation meaningfully back below the 2% target, so we think in reality inflation targets will move," Renton said. ($1 = 0.8013 pounds)
(Reporting by Davide Barbuscia; Editing by Will Dunham)