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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Tags: CPI, ETF 101, GRES, New ETFs