Yes, much of the blame lies with energy prices, which surged due to the war in Iran. Still, the March reading of the Consumer Price Index (CPI) serves as a reminder of the work to be done to damp inflation. Advisors and investors can’t afford to take their eyes off inflation-fighting assets, including Treasury Inflation-Protected Securities (TIPS).
Read more: Prepare for a Gold Rebound With This Nifty ETF
TIPS have long been a preferred fixed income destination at times when inflation runs high. However, many of the ETFs addressing this corner of the bond market are old and hard to differentiate from one another.
The WisdomTree Inflation Plus Fund (WTIP), which turns a year old in June, is obviously youthful. More importantly, it refreshes the TIPS ETF proposition by investing in not only those bonds, but in commodities as well. The ETF even sprinkles a little bitcoin exposure, to the tune of 2.66% of its portfolio, confirming its uniqueness in the TIPS ETF space.
WTIP Holding Up Nicely
Having inflation protection is nice, but only when the assets in question “cooperate.” With gold being a prime example, that hasn’t happened across the board since the start of conflict in Iran. However, WTIP is standing tall.
“Despite a sharp drawdown in traditional hedges such as gold (down over 15%), WTIP has gained 6.54% during the conflict and approximately 12% year to date, highlighting how its dynamic commodity positioning and TIPS exposure may outperform in volatile, inflationary regimes,” noted Behnood Noei, director of fixed income at WisdomTree.
While WTIP has long exposure to gold and silver — two precious metals that have recently experienced turbulence — the rest of its commodities sleeve is dynamic. That means the ETF can respond to near-term trends, including soaring energy prices. WTIP’s plumbing proves flexibility works when it comes to fighting inflation.
“The current environment is a perfect example of how this design has translated into performance,” added Noei. “Despite the significant declines in gold and silver, down more than 13% and 35%, respectively, from their all-time highs at the beginning of the conflict, WTIP has managed to post a gain of 6.54% over the same period. That brings its year-to-date return to around 12%. In a market where many asset classes are firmly in bear territory, this outcome is extraordinary.”
Bottom line: WTIP isn’t your typical TIPS ETF and that’s alright. Actually, it’s better than just alright.
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