As Fed Continues to Tighten Amid Inflation, Get Real Assets Exposure

Keeping inflation in check continues to be the prime focus of the U.S. Federal Reserve. The capital markets are already expecting a 50-basis point rate hike at the next Fed meeting.

“Most investors have no experience with run-away inflation and its impact on the market,” wrote Rida Morwa in Seeking Alpha. “The last time the U.S. saw significant inflation ramping up was the 1970s. We’ve seen hyperinflation in other countries where rapidly the value of their currency disappears as money is mass printed. We can think of Germany after the World Wars, for example, where a wheelbarrow of cash was required to buy a simple piece of bread.”

One way to hedge against inflation is by picking up real assets. In the case of exchange traded funds (ETFs), opportunities are available to get aggregate real asset exposure in one fund.

1 ETF for Getting Real Asset Exposure

One ETF to consider is the FlexShares Real Assets Allocation Index Fund (ASET). As of April 29, the top three allocations are real estate, industrials, and utilities.

That top exposure to real estate is an ideal selection in the current market environment. Real estate prices have skyrocketed since the pandemic and don’t appear to be letting up amid hot inflation.

“Real estate benefits from inflation directly, while floating rate investments benefit from the Federal Reserve’s response to inflation,” Morwa added.

As opposed to holding multiple assets like precious metals or commodities like oil, ASET can give investors exposure to it all through one position. Additionally, volatility is minimized due to ASET holding companies that represent real asset exposure instead of the actual tangible assets themselves.

ASET seeks investment results that correspond generally to the price and yield performance of the Northern Trust Real Assets Allocation Index. The underlying index measures the performance of an optimized allocation to the underlying funds that is intended to provide exposure to certain real assets and minimize the overall volatility of an investment in the underlying funds.

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