The recently revealed December reading of the Consumer Price Index (CPI) was worse than many experts and politicians expected, confirming that inflation remains front-and-center for asset allocators in 2022.
Plenty of advisors and investors will look to exchange traded funds for inflation-fighting assistance, and while dozens of ETFs have the word “inflation” in their names, not all deliver the goods in terms of helping investors grapple with a soaring CPI. One that does is the VanEck Inflation Allocation ETF (RAAX).
RAAX, which turns four years old in April, is actively managed and can allocate to a variety of assets with inflation-fighting reputations, including “commodities, natural resource equities; income assets: REITs, Infrastructure, MLPs; and financial assets: gold, bitcoin,” according to VanEck.
Active management and the ability of RAAX to maintain diversification amid inflationary backdrops are potentially attractive traits for end users.
“RAAX offers comprehensive exposure across commodities, natural resource equities, REITs, MLPs and infrastructure. The Fund seeks to be responsive to changing market environments, including the ability to allocate 100% to cash during market stress, and an optimized allocation process providing exposure to segments with positive expected returns while managing overall portfolio risk,” according to VanEck research.
Another advantage offered by RAAX is that the ETF’s managers don’t pick individual securities to beat inflation. Rather, the 23 holdings in RAAX are other ETFs, making it a fund of funds. That lineup includes ETFs from other issuers. VanEck funds found in RAAX include the VanEck Merk Gold Trust (OUNZ), the VanEck Vectors Agribusiness ETF (MOO), the VanEck Vectors Oil Services ETF (NYSEArca: OIH), and the VanEck Vectors Mortgage REIT Income ETF (MORT), among others.
Currently, RAAX is heavily allocated to hard assets with a diversified commodities fund, a real estate ETF, and OUNZ combining for about 44% of the fund’s roster.
“RAAX provides exposure to real assets while seeking to minimize the impact of drawdowns. Real assets can potentially help investor’s combat rising inflation, enhance portfolio diversification, and participate in global growth,” adds VanEck.
The assets that RAAX provides exposure to have established reputations for outperforming traditional fare when inflation surprises to the upside. As VanEck notes, during periods of surprisingly higher inflation from 2003 through 2017, natural resources, commodities, infrastructure, and real estate investment trusts (REITs) beat broad domestic equity benchmarks, diversified baskets of bonds, and Treasury Inflation Protection Securities (TIPS).
RAAX charges 0.78% per year, or $78 on a $10,000 stake.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.