Investors these days have a plethora of options to hedge inflation. While traditional commodities like gold or lately digital assets like cryptocurrencies might come to mind, one option investors may not have conjured up in their minds is natural resources.
With demand for energy, agriculture, metals, forestry, and water, these are all products where prices can rise in tandem with inflation. As such, one opportunity to consider is the FlexShares Morningstar Global Upstream Natural Resource Index Fund (GUNR).
With the S&P 500 down 9% on the year, one sector flourishing amid the volatility is the energy sector. The S&P 500 Energy index is up close to 22% for the year, highlighting the strength in rising oil prices.
That said, pop opens the holdings hood of GUNR, and you’ll see top oil names. Household oil names like Exxon Mobile Corporation and Chevron Corporation make up about 10% of the fund’s assets as of February 17, which speaks to GUNR’s strong performance year-to-date (10%).
Another feature of GUNR to go along with its price appreciation is its dividend component. The fund offers a quarterly demand with a current annual dividend rate of 3.09%, outperforming its category average by 74 basis points as of February 17.
An ETF to Meet Natural Resources Demand
Per its fund description, GUNR provides exposure to the rising demand for natural resources and tracks global companies in the energy, metals, and agriculture sectors. It maintains a core exposure to the timberlands and water resources sectors, part of its risk management theme.
“We believe that demand for natural resources is expected to increase for an extended period due to growing populations and rising per-capita income in global markets,” FlexShares said. “Adding exposure to natural resources investments provides a possible opportunity to capitalize on the potential benefit of rising natural resource product prices.”
As aforementioned, GUNR can also provide investors with an inflation-hedging option pertinent to the current market landscape. As demand for natural resources continues amid tightening supply, this can help counteract economic forces of supply and demand that create inflationary pressures.
“The market forces producing these opportunities may also create the potential to offset some of the longer-term inflationary effects of economic expansion in emerging and established regions,” FlexShares added.
For more news, information, and strategy, visit the Multi-Asset Channel.