Index IQ’s New ETFs Explained

Index IQ’s newest exchange traded funds (ETFs) seek to operate as hedges against inflation. More information on how they work is pouring in.

Index IQ hosted a conference call that Roger Nusbaum on Seeking Alpha was able to get in on. (Read about their new ETFs here):

• IQ CPI Inflation Hedged ETF (NYSEArca: CPI)
  
• IQ ARB Global Resources ETF(NYSEArca: GRES)

Here are some facts he learned:

• For now the reported inflation environment is benign so CPI can be heavy in T-bills. At times of higher inflation, the fund will allocate more to things like gold, oil and even equities and real estate – possibly meaning REITs.
• The reason for no TIPS exposure in CPI is that it turns out that per their research, TIPS have a very low correlation to the reported inflation rate, which the CPI fund benchmarks against. The other reason cited is that longer-dated TIPs are also very sensitive to interest rates.
• GRES has large weightings in some stocks but larger weightings in others; this is so the fund will give an overall equal weight to eight different industries.
  

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