“TIPS modestly outperformed Treasury securities through 2017, meaning that many TIPS investors did not sacrifice total return performance to maintain inflation protection,” said FlexShares. “As investors continue to expect higher inflation, reflected by BES, those who think inflation will trend even higher may benefit from holding a position in TIPS.
TDTT has a stablemate to consider, the FlexShares iBoxx 5Yr Target Duration TIPS ETF (NYSEArca: TDTF). TDTF has 24 holdings and $925.1 million in assets under management. The fund tracks the iBoxx 5-Year Target Duration TIPS Index. TDTF has a modified adjusted duration of 4.89 years.
“We believe that this combination of GDP growth, low unemployment and expansionary fiscal policy has the potential to spur wage growth, spending and unexpected inflation,” according to FlexShares. “Should this be the case, maintaining inflation protection via TIPS may be advantageous if the market ultimately reacts to higher inflation trends, and lagging investors rush to add a position.”
For more information on Treasury inflation protected securities, visit our TIPS category.