Natural Resources Assets Make Ideal Inflation Plays

Rising inflation is opening pathways for savvy investors looking at assets like the FlexShares Morningstar Global Upstream Natural Resources Index Fund (GUNR).

As the expectation of rising rates ticks higher with rising prices, commodities and natural resources offer an ideal hedge. GUNR combines that trait with the convenience of an ETF wrapper that holds multiple positions.

“Rising demand combined with supply shortages have created the perfect storm for commodities and natural resources prices,” a FlexShares blog post explained. “At the onset of the pandemic in the first half of 2020, factories and producers either running at reduced capacities or shuttering entirely resulted in significant supply shortages.”

“As economies started reopening in the third quarter of 2020, demand began to recover—further supported by monetary and fiscal policy,” the blog post said further. “Demand has since continued to rise, driven by the COVID-19 vaccination rollout and the prospect of increased fiscal spending under the Biden administration.”

The fund 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 fund will invest at least 80% of its total assets (exclusive of collateral held from securities lending) in the securities of the index and in ADRs and GDRs based on the securities in the index.

GUNR: Striking the Perfect Balance

Additionally, GUNR gives investors a balanced approach to minimize concentration risk.

“While the perfect storm of short supply and rising demand has propelled strong performance for each of these natural resources sectors, it’s possible some sectors could overheat—and others could have more growth potential,” the blog post explained. “A balanced approach where a natural resources allocation spans a broad swath of sectors could help mitigate these risks.”

The post also mentioned that the fund is “designed to provide efficient and balanced exposure to a broad expanse of global natural resources sectors in a single ETF. It’s comprised of natural resources equities across numerous sectors including energy, metals, timber, and water.”

“As such, investors gain natural resources exposure without the need to time which sectors could be heating up—and which could be due for a downturn,” the blog post added.

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