Is there any question that inflation will drive the investment narrative for at least the next year? The unprecedented levels of fiscal and monetary stimulus, months of pent-up demand, ongoing supply chain disruptions, and swift vaccine rollouts have primed the market to anticipate higher inflation, rate hikes, and unclear growth prospects, yet the advisor’s job hasn’t changed: building the best portfolio for your clients.
In the upcoming webcast, Your Inflation Toolkit: A Walkthrough for Advisors, WisdomTree Asset Management’s Jeremy Schwartz, global chief investment officer, and Kevin Flanagan, head of fixed income strategy, will discuss how investors can nimbly adapt to the environment ahead by picking the right investment tools for the job.
For example, the WisdomTree Managed Futures Strategy (WTMF) is the place to be for investors seeking managed futures exposure, a strategy long embraced by hedge funds. Managed futures are considered an alternative investment strategy — an asset class that’s long vexed ordinary investors. However, WTMF makes allocating to alternatives easier and more efficient. Additionally, though products like WTMF aren’t explicitly intended to provide protection against rising interest rates or inflation, they often do just that.
The more recently launched WisdomTree Efficient Gold Plus Gold Miners Strategy Fund (GDMN), an actively managed ETF, invests in a portfolio comprised of global equity securities issued by companies in the gold mining business, generally weighted by modified market capitalization, and U.S.-listed gold futures contracts. GDMN utilizes the gold futures to enhance its capital efficiency. WisdomTree believes that GDMN is an innovative and capital-efficient alternative to traditional gold miner ETFs or leveraged gold miner ETFs.
Fixed income investors have some avenues for combating higher interest rates ahead, including floating rate notes. A variety of exchange traded funds, including the WisdomTree Bloomberg Floating Rate Treasury Fund (NYSEArca: USFR), provide exposure to that corner of the bond market. USFR, which turns eight years old next month, tracks the Bloomberg U.S. Treasury Floating Rate Bond Index. When yields rise, it’s a particularly thorny issue for longer-dated bonds. Conversely, floating-rate bonds, including USFR components, significantly reduce rate risk.
Additionally, the WisdomTree Interest Rate Hedged U.S. Aggregate Bond Fund (NYSEARCA: AGZD) could provide a long position representative of the Agg with a short position in Treasury futures to target zero duration. It can complement the core position of a fixed income portfolio, providing more diversification than corporate-based rate hedge solutions and less concentration in financials.
Financial advisors who are interested in learning more about inflation strategies can register for the Tuesday, February 8 webcast here.