TIP holds assets of $19.8 billion. Year to date, investors have pulled $2.1 billion from TIP. The ETF is third on the list for heaviest outflows in 2013, according to IndexUniverse data. [TIPS ETFs See Outflows as Investors Scale Back Inflation Bets]
With TIPS, the principal is linked to changes in the CPI. However, the bonds are also sensitive to interest rates just like regulatory Treasuries. Therefore, TIPS can lose value if Treasury yields rise. [TIPS ETFs: Watch Out if Rates Rise Faster than Inflation]
For TIPS ETF investors, the inflation “breakeven rate” is important to watch. It is determined by comparing the yields of regular government bonds against inflation-protected securities of the same duration, usually 10 years. If inflation averages more than the breakeven rate over the next decade, then investors would be better off owning TIPS than normal Treasury bonds. [TIPS ETF with Negative Yield Sees Outflow]
iShares TIPS Bond ETF
Full disclosure: Tom Lydon’s clients own TIP.