With inflation at the forefront of concerns for investors and advisors going into the new year, alternative investment groundbreaker AXS Investments announced in a press release the launch of its fund, which is the first multi-asset, global ETF focused on both protecting and profiting from increasing inflation. The AXS Astoria Inflation Sensitive ETF (PPI) is an actively managed fund that seeks to invest in securities that are positioned to benefit in an inflationary environment.
The PPI ETF represents the first in a robust lineup of ETFs that AXS is bringing to market as we move into 2022. The AXS management team includes several early players in the ETF market, including Greg Bassuk, the co-founder of IndexIQ, and Ben Fulton, who helped build the PowerShares and Invesco ETF businesses.
PPI contains 50 cyclically oriented stocks such as industrials, materials, banks, and home builders that have historically been sensitive to inflation. The fund also has exposure to physical commodities and TIPS through securities and ETFs, offering an overall blend that is unique in the ETF space.
“An ETF comprised of a broad range of inflation-sensitive assets requires highly specialized and experienced active management, and we believe there’s no one better suited to manage this strategy than John Davi,” said Greg Bassuk, CEO of AXS Investments. “He and the Astoria team have a long history of success in managing inflation-sensitive portfolios for RIAs and financial advisors, and we are thrilled to partner with them to bring PPI to market at such a crucial time for advisors and investors to position their portfolios for the dramatic return of inflation we’re expecting into 2022.”
In the past, ETF investors have had to position for inflation in single exposure strategies, such as investing solely in commodities, TIPS, or equities, each with its own benefits and drawbacks. By combining exposure in one ETF, an investor can take a more dynamic approach to hedging for inflation while seeking to generate investment results that are rate-adjusted and positive, explained John Davi, founder and CIO of Astoria Advisors, an institutional manager.
“For the past 10 years, investors have experienced significant portfolio gains from lower interest rates which have resulted in large gains in growth/tech stocks and outperformance in interest rate products. A classic 60/40 portfolio will struggle if interest rates continue to rise (as they have since middle of 2020),” wrote Davi in a communication to ETF Trends. “TIPS while gathering significant assets year to date, simply are not enough to hedge inflation risk for 60/40 portfolios.”
The fund’s sub-advisor, Astoria, incorporates a top-down quantitative approach when selecting securities that includes screening for growth prospects, valuations, and quality, and the fund screens for sectors that have been the most sensitive to rising rates (industrials, materials, energy, and banks). The fund is anticipated to contain mostly U.S. issuers but can invest in securities within Asia, Canada, or Europe as well and will invest in 50–60 equity mid- to large-cap companies at any given time.
The current allocations for PPI are cyclical stocks at 85.25%, commodities at 9.75%, and TIPS at 5.00%, as of December 30.
PPI carries an expense ratio of 0.71% and is actively managed by John Davi, the founder and CIO of Astoria Advisors.
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