Rising inflation and the pandemic are enough to build a wall of worry for investors, but three exchange traded funds (ETFs) from FlexShares can help alleviate the anxiety.
To address inflation, investors will want exposure to certain sectors that can stay a step ahead of rising consumer prices. This is where the FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA) comes into play by getting real asset exposure.
“Global listed infrastructure has delivered returns in excess of inflation over the long-term,” First State investments explains. “Most infrastructure assets have an explicit link to inflation through regulation, concession agreements or contracts.”
NFRA seeks investment results that generally correspond to the price and yield performance of the STOXX® Global Broad Infrastructure Index. The index reflects the performance of a selection of companies that, in aggregate, offer broad exposure to publicly traded developed and emerging market infrastructure companies, including U.S. companies, as defined by STOXX Ltd. pursuant to its index methodology.
A second inflation hedge plays on rising prices on natural resources like oil and gas. Specifically, an opportunity exists in the FlexShares Morningstar® Global Upstream Natural Resources Index Fund (GUNR).
GUNR seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Morningstar® Global Upstream Natural Resources Index. The index reflects the performance of a selection of equity securities that are traded in or are issued by companies domiciled in global developed or emerging markets, as determined by the index provider pursuant to its index methodology.
Muting Forthcoming Volatility
With inflation and the pandemic weighing heavy on the markets, it’s necessary to get market exposure that helps mute the volatility. This is available in the FlexShares US Quality Low Volatility Index Fund (QLV).
QLV tracks a proprietary index of U.S. companies that aims for a portfolio bias toward quality and reduced volatility. The index methodology first assesses financial strength and stability based on quality metrics like profitability, management efficiency, and cash flow. The lowest-scoring companies are excluded.
QLV seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust Quality Low Volatility Index. The underlying index is designed to reflect the performance of a selection of companies that, in aggregate, possess lower overall absolute volatility characteristics relative to the Northern Trust 1250 Index, a float-adjusted market capitalization-weighted index of U.S.-domiciled large- and mid-capitalization companies.
“The FlexShares US Quality Low Volatility Index Fund (QLV) is designed to provide exposure to US-based companies that possess lower overall absolute volatility and that also exhibit financial strength and stability, which we believe are quality characteristics,” a FlexShares Fund Focus says.
Companies that are well-positioned from a financial standpoint are attractive to FlexShares right now and generally less volatile. Given low returns in fixed income, quality low volatility exposure is an ideal way to remain invested in equities while taking some volatility off the table.
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