ETF 360: VanEck's David Schassler on Fighting Inflation

On the latest episode of ETF 360, VettaFi head of research Todd Rosenbluth was joined by David Schassler, Head of Quantitative Investment Solutions for VanEck. The two discussed the VanEck Inflation Allocation ETF (RAAX) and VanEck’s economic outlook.

“Our view is that this next regime that we’re in right now looks nothing like what we had in the previous decade,” Schassler said. He sees a coming regime of sustained elevated inflation, which means ongoing elevated rates. “What worked really well in the previous decade – given that you had super-low interest rates and everything that came along with that – is unlikely going to work,” he added.

Savers are going to have the edge on spenders, and lenders will perform better than borrowers, according to Schassler. He also sees an increase in volatility amid the transition between these economic regimes. “That’s what we’re prepared for, and that’s what this fund is all about.”

RAAX and Inflation Fighting Assets

RAAX is positioned to do better amid the new regime. Going into specifics, Schassler mentioned commodities. Because commodities respond purely to supply and demand, the expectation is that commodity prices will rise to meet inflation. Schassler also sees equities that are focused on producing and distributing natural resources and commodities as potentially well-positioned. “You’d expect those companies to outperform,” he said. Finally, he pointed to gold bullion. “Gold is the ultimate store of value asset.”

Gold also has the advantage of seeing a potential lift if a recession occurs.

“RAAX is an active, inflation-fighting fund.” Schassler outlined its three pillars, which included resource assets, financial real assets, and income-generating real assets. Resource assets include commodities and natural resource equities. Financial real assets include both gold bullion and gold equities. Income-generating real assets include REITs and MLPs. “We have a process that helps us to maintain strong diversification across these real assets so you can hold it as a core inflation fighting [part of your portfolio.]”

To watch past episodes of ETF 360, visit VettaFi’s ETF 360 Channel.