Inflation: Preparing Portfolios for a Shifting Environment | ETF Trends

As the world emerges from the coronavirus pandemic, the combination of easy monetary policy, massive fiscal stimulus, a rebounding labor market, and rising consumer spending has led inflation to spike to its highest level in decades.

In the upcoming webcast, Inflation: Preparing Portfolios for a Shifting Environment, Alex Graf, ETF Specialist, Institutional and ESG Models, Nuveen; and Brian Griggs, Managing Director, Portfolio Strategist, Nuveen, will dive into how investors can prepare their ETF portfolios to guard against inflation’s risks.

For example, investors can look at the Nuveen ESG Dividend ETF (Cboe: NUDV). NUDV is the first ESG dividend ETF in the industry to incorporate low carbon criteria. The fund focuses on providing yield and seeks to track an ESG-enhanced custom index developed by Nuveen’s Responsible Investing team.

Consistent with Nuveen’s existing suite of 10 ESG-oriented index-tracking ETFs, the underlying holdings of NUDV will be rebalanced quarterly and will incorporate a customized set of eligibility criteria, including ESG rating, controversial business involvement, fossil fuel reserves, and carbon emissions levels, the last of which is a crucial differentiator of Nuveen’s custom methodology.

The Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF (NYSEArca: NUSA) tries to reflect the performance of the BofA Merrill Lynch Enhanced Yield 1-5 Year US Broad Bond Index, which is represented by a modified version of the more widely observed BofA Merrill Lynch 1-5 Year US Broad Market Index.

The Enhanced Index does not weight components by market capitalization, instead opting to assign components into various categories based upon asset class, sector, credit quality, and maturity. The smart beta indexing methodology then utilizes a rules-based process to include higher weights to categories with higher yields while maintaining risk and credit quality at levels similar to the Base Index.

Additionally, the NuShares Short-Term REIT ETF (BATS: NURE) tries to reflect the performance of the Dow Jones U.S. Select Short-Term REIT Index, which is comprised of real estate investment trusts that invest in residential or commercial real estate with a shorter-than-average lease duration than REITs investing in other sectors.

NURE focuses on REITs with short-term lease agreements, which may be less volatile and sensitive to interest-rate changes than longer-term REITs. These types of shorter-term REITs may be a good way for income-minded investors to access yield generation in a rising rate environment, as short-term contracts allow businesses to reprice and adapt to changing market environments more quickly. Due to the REITs’ structure that allows most revenue to be distributed as income to shareholders, businesses’ prudent reactions could translate to higher returns for investors.

Financial advisors who are interested in learning more about investment portfolio strategies can register for the Thursday, March 24 webcast here.