Manage Inflation Expectations With This ETF

Some fixed income exchange traded funds can help investors balance bond portfolios when inflation ticks higher. A solid idea from that group is the ProShares Inflation Expectations ETF (NYSEArca: RINF). RINF, which turns seven years old in January, tracks the FTSE 30-Year TIPS (Treasury Rate-Hedged) Index.

RINF is “designed to provide exposure to 30-year breakeven inflation (a widely followed measure of inflation expectations),” according to Maryland-based ProShares. “The fund’s index is designed to be sensitive to changes in breakeven inflation. It is not designed to reflect CPI or other measures of realized inflation.”

TIPS are a type of Treasury security that are indexed to inflation as a way to shield investors from the negative effects of inflation. The securities’ par value rises with inflation as measured by the Consumer Price Index while interest rate remains fixed. TIPS also offer investors another layer of diversification as many aggregate bond funds exclude TIPS from their holdings.

Data suggest RINF’s performance has recently been impressive among high-grade U.S. government bond ETFs.

“The one-year return is 9.3 percent and its annualized three-year track record is up 2.1 percent. It’s down 2.9 percent on a five-year basis,” reports Financial Advisor. “The 12-month yield is 2.96 percent and its expense ratio is 30 basis points. RINF has $11.7 million in assets under management.”

The Strategy Behind ‘RINF’

While RINF’s net modified duration is -0.16 years, the fund’s income profile remains solid with a 30-day SEC yield of 2.20%.