ETF Spotlight: Inflation Protection

August 23rd at 11:35am by Tom Lydon

ETF Spotlight on IQ Real Return ETF (NYSEArca: CPI), part of an ongoing series.

Assets: $40.7 million.

Objective: The IQ Real Return ETF tries to reflect the performance of the IQ Real Return Index, which provides a hedge against U.S. inflation rate by tracking the “real return” – the return above the rate of inflation represented by the Consumer Price Index.

Holdings: Top holdings include: iShares Barclays Short Treasury Bond Fund ETF (NYSEArca: SHV) 43.8%, SPDR Barclays Capital 1-3 Month T-Bill ETF (NYSEArca: BIL) 25.7%, SPDR S&P 500 ETF (NYSEArca: SPY) 10.3%, iShares Barclays 20 Year Treasury Bond Fund ETF (NYSEArca: TLT) 9.4% and PowerShares DB Gold Fund (NYSEArca: DGL) 9.2%.

What You Should Know:

  • IndexIQ sponsors the fund.
  • CPI has a 0.66% expense ratio.
  • The fund has nine ETF holdings.
  • According to IndexIQ, the ETF offers the “ability to invests across up to 10 areas of inflation sensitive assets with a cash core” and a “low volatility alternative to TIPs and short duration fixed income.”
  • “Core is Short Term Treasuries with satellite allocations to oil, real estate, gold, equities and currencies (with no more than 10% to each),” according to the provider.
  • CPI has a 0.02% dividend yield.
  • The ETF is flat over the past month, up 1.0% over the last three months and up 1.2% year-to-date.
  • The fund is 1.2% above its 200-day exponential moving average.

The Latest News:

  • Consumer price index was unchanged in July, Financial Times reports.
  • Core CPI, which excludes food and energy prices, only inched up 0.1%, below the 0.2% expectations.
  • “Inflation meanwhile fell from 1.7 per cent in June to 1.4 per cent [over the previous year], pointing to a ‘goldilocks’ combination of accelerating economic growth and falling price pressures,” Chris Williamson, chief economist at Markit said in the article.
  • The Federal Open Market Committee stated Aug. 1 that it will “provide additional accommodation as needed” to help generate jobs, Bloomberg reports.
  • “I don’t think inflation is a problem at this stage, and I’m not worried about additional QE causing an inflation surge,” Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ, said in the Bloomberg article. “I am not a big buyer of the idea that QE putting out too many dollars” causes prices to jump.

IQ Real Return ETF

For past stories in this series, visit our ETF Spotlight category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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