October 28, 2009 at 1:00 pm by Tom Lydon
Index IQ has introduced two new exchange traded funds (ETFs) that are intended to provide a hedge against inflation.
The new ETFs offered by Index IQ are:
As we enter a period of more inflationary pressures, investors will want to protect their assets against the odds. (Here are some tools to hedge inflation). These two new funds offer a sophisticated approach to hedging the impact of a broad-based rise in price levels as measured by the Consumer Price Index (CPI).
The IQ CPI Inflation Hedged Index, the index underlying CPI, seeks to give investors a hedge against changes in the U.S. inflation rate by providing a “real return,” or a return above the rate of inflation as measured by changes in the Consumer Price Index. (How can investors handle rising prices with ETFs?)
Adam Patti, Index IQ’s CEO, tells Luisa Beltran for Ignites that the company wanted to have a portfolio of securities that make up different asset classes so that when inflation returns, there will be asset classes to capture it.
CPI is an ETF of ETFs and will have 54% allocated to the iShares Barclays Short Treasury Bond Fund (NYSEArca: SHV), 29% to SPDR Barclays Capital 1-3 Month T-Bill (NYSEArca: BIL), 8% in iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLH), 7.3% in SPDR Gold Trust (NYSEArca: GLD) and 1% in the CurrencyShares Japanese Yen Trust (NYSEArca: FXY).
GRES is the first global resources hedged ETF. The fund seeks to solve the problems associated with the significant overweight in the energy sector inherent in other broad-based commodity products. GRES also provides a hedge against inflation and a real return through exposure to a diversified portfolio of commodity-related equities.
The fund invests in five traditional sectors: livestock; precious metals; grains, food and fiber; industrial metals; and energy. Also found in the index are coal, timber and water.
IndexIQ utilizes a proprietary rules-based methodology to construct the underlying CPI and GRES indexes. The expense ratio for both ETFs comes in at 0.75%.
For more stories about new ETFs, visit our new ETFs category.
Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.
Tags: CPI, Global ETFs, GRES, Indexing, New ETFs
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