Wednesday’s CPI print of 9.1% of inflation year-over-year in June is the highest since 1981 and marks the second month in a row where prices rose faster than forecasters expected.
Stubborn and strong inflation figures have gripped the global economy in the past several months, inevitably drawing attention to a small set of ETFs specifically aiming to profit off runaway prices. The 15 U.S.-listed ETFs with the word “inflation” in their names have brought in a net $356 million in assets in the first half of the year. Those figures exclude TIPS-only funds with inflation in their names but don’t specifically aim to generate returns in an inflationary environment.
Inflation has also emerged as a theme for fund issuers, with five ETFs targeting the phenomenon having been launched since December 2021.
Yet these funds take different approaches toward the same problem, whether they’ve been around for years or launched in the past year and a half in response to inflation’s surge in the U.S. and abroad.
But just one ETF, the Harbor All-Weather Inflation Focus ETF (HGER), has a positive return in the first half of a year dominated by decades-inflation. Let’s look at how these funds have performed in 2022.
Equities
| Ticker | Fund Name | Launch Date | YTD Returns | AUM | 1H Flows | Asset Style |
|---|---|---|---|---|---|---|
| FCPI | Fidelity Stocks for Inflation ETF | 11/5/2019 | -13.99% | $254.5M | $189.66M | Follows an equity index. |
| INFL | Horizon Kinetics Inflation Beneficiaries ETF | 1/11/2021 | -7.46% | $1.3B | $592.14M | Targets equities that produce inflation-linked commodities. |
Inflation, in theory, can support returns in certain sectors if firms can pass the additional cost of doing business to consumers without much backlash. These ETFs follow that line of thinking by gaining exposure to stocks poised to retain cash flow by selling necessities.
However, fears of a recession have swept every sector other than energy into negative territory in the year. That includes the Fidelity Stocks For Inflation ETF (FCPI), which combines an 11.5% allocation to technology stocks like Apple and Microsoft with 11% allocations to energy and consumer staples stocks, and the Horizon Kinetics Inflation Beneficiaries ETF (INFL), which leans toward energy producers, miners, and financial institutions.
Bonds & Swaps
| Ticker | Fund Name | Launch Date | 1H Returns | AUM | 1H Flows | Asset Style |
|---|---|---|---|---|---|---|
| RINF | ProShares Inflation Expectations ETF | 1/10/2012 | -0.02% | $49.8M | $26.93M | Holds 30-Year TIPS and swaps to track the movement of inflation breakevens. |
| IVOL | Quadratic Interest Rate Volatility & Inflation Hedge ETF | 5/13/2019 | -4.19% | $1.7B | -$698.09M | Holds exposure to TIPS and options on interest rate swaps. |
| FLTN | Rareview Inflation/Deflation ETF | 1/5/2022 | -0.03% | $8.7M | $8.13M | Holds TIPs or regular Treasuries based on movement of CPI, and uses interest rate swaps and options on inflation benchmarks. |
| CPII | Ionic Inflation Protection ETF | 6/28/2022 | N/A | $6M | $5.99M | A blend of TIPS, swaps & options. |
| IRVH | Global X Rate Volatility & Inflation Hedge ETF | 7/6/2022 | N/A | $2.47M | N/A | Actively holds TIPs and options on yield curve spread options. |
| JCPI | JPMorgan Inflation Managed Bonds ETF | 4/8/2022* | -2.85% | $1.06B* | N/A | Actively holds a blend of primarily investment-grade bonds and options. *Fund converted from a mutual fund earlier this year. |
| AGIH | iShares Inflation Hedged U.S. Aggregate Bond ETF | 6/22/2022 | N/A | $5.07M | N/A | Follows an index tracking AGG and inflation swaps along the yield curve. |
| HYGI | iShares Inflation Hedged High Yield Bond ETF | 6/22/2022 | N/A | $2.49M | N/A | Follows an index tracking HYG and inflation swaps along the yield curve. |
| LQDI | iShares Inflation Hedged Corporate Bond ETF | 05/05/18 | -13.47% | $97.4M | -13.08% | Follows an index tracking LQD and inflation swaps along the yield curve. |
Performance and flows figures are not listed for funds launched in the last 30 days.
These funds tend to hold a combination of inflation-sensitive TIPS bonds and swaps to either generate returns greater than the inflation rate or provide fixed income payments while hedging against inflation and rate moves.
However, their relative outperformance to the 6% loss in the iShares TIPS Bond ETF (TIP) or the 10.59% drop in the iShares Core U.S. Aggregate Bond ETF (AGG) can come at a steep fee. Multiple funds in this list charge more than 1% in fees after waivers due to the cost of buying options or entering swap agreements. RINF’s current waiver expires at the end of September when its expense ratio will jump from 0.30% to a massive 1.7%.
The recently-launched Global X Rate Volatility & Inflation Hedge ETF (IRVH) is the lowest cost at 45 basis points.
The funds could also take on greater portfolio turnover risk as their managers exercise options or rebalance ahead of expiring contracts.
Blended & Commodity Strategies
| Ticker | Fund Name | Launch Date | YTD Returns | AUM | 1H Flows | Asset Style |
|---|---|---|---|---|---|---|
| RAAX | VanEck Inflation Allocation ETF | 4/9/2018 | -0.4% | $154.8M | 137.02M | Active, primarily holds ETPs tracking stocks, commodities and currencies. |
| PPI | AXS Astoria Inflation Sensitive ETF | 12/30/2021 | -6.96% | $67.6M | $76.13M | Active, holds a blend of equities and ETFs tracking commodities, short-maturity TIPS and agriculture companies. |
| IWIN | Amplify Inflation Fighter ETF | 2/2/2022 | -17.37% | $14.7M | $18.47M | Active, holds a blend of equities and ETFs tracking commodities and rate-linked securities. |
| HGER | Harbor All-Weather Inflation ETF | 2/9/2022 | 10.96% | $64.52M | $63.09M | Tracks an index of commodities based on open interest on futures contracts, inflation sensitivity and roll yield. |
The last category of inflation funds chase inflation-adjusted absolute returns across multiple asset classes, with commodities and commodity-connected equities among the top holdings.
As noted before, HGER is the only inflation-focused ETF with positive returns this year. The fund provides exposure to an index of commodity futures contracts through a Cayman Islands subsidiary that’s largely tilted toward multiple forms of oil and gas.
The VanEck Inflation Allocation ETF (RAAX) only holds other ETFs, with more than half of its assets invested in three funds tracking diversified commodities, gold, and global infrastructure companies. The Amplify Inflation Fighter ETF (IWIN) is the most diverse of holdings among asset classes, holding stocks, ETFs, and direct futures contracts on soybeans, bitcoin, and a 10% allocation to gold futures, the largest in its portfolio.
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