ETF Spotlight on IQ Real Return ETF (NYSEArca: CPI), part of an ongoing series.
Assets: $28.6 million.
Objective: The IQ Real Return ETF tries to reflect the performance of the IQ Real Return Index, which tries to provide a hedge against U.S. inflation rate by generating “real return,” or a return above the inflation rate. [TIPS ETFs as an Inflation Hedge]
Holdings: Top holdings include: iShares Barclays Short Treasury Bond Fund ETF (NYSEArca: SHV) 50.1%, SPDR Barclays Capital 1-3 Month T-Bill ETF (NYSEArca: BIL) 20.3%, iShares Barclays 20 Year Treasury Bond Fund ETF (NYSEArca: TLT), 10.9%, SPDR S&P 500 ETF (NYSEArca: SPY) 6.7% and Powershares DB Gold Fund ETF (NYSEArca: DGL) 5.5%.
What You Should Know:
- IndexIQ sponsors the fund.
- CPI has an expense ratio of 0.48%.
- The fund holds 16 securities.
- “Our research shows that a combination of assets, each with varying levels of sensitivity to inflation, may be a more effective way to hedge inflation risk,” Salvatore Bruno and Ludwig Chincarini wrote in a white paper titled “A Multi-Asset Approach to Inflation Hedging.”
- “We use a portfolio based approach to show that a core position in short-term Treasury bills or one-month CDs with satellite positions in longer term bonds, gold, oil and emerging market equities form the basis of a portfolio for an investor looking for a positive real return, while helping to minimize the downside risk with respect to inflation,” according to the white paper.
- The ETF includes a core holding in short-term Treasuries, along with satellite holdings in long-term Treasuries, real estate, U.S. large-cap equity, U.S. small-cap equity, international equity, British pound, Japanese yen, euro, oil and gold.
- Asset exposure through ETF holdings vary based on monthly rebalance.
- CPI is down 0.8% over the past month, down 1.2% over the past three months and up 2.8% over the last year.
The Latest News:
- U.S. consumer prices remained flat in April as cheap gas helped offset a rise in food, clothing and housing prices, reports Christopher S. Rugaber for the Seattle Times.
- The Labor Department announced that the Consumer Price Index was unchanged in April after a 0.3% rise in March.
- Excluding volatile food and gas, “core” prices increased 0.2% in April.
- Over the last year, the CPI has increased 2.3%, the smallest gain in over a year.
- The Federal Reserve’s inflation target is 2%.
- “We see little in the way of … significant inflation pressures,” Dan Greenhaus, chief global strategist at BTIG, said in the article.
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.