A New Fund to Hedge Inflation
Horizon Kinetics Inflation Beneficiaries ETF, introduced in January, offers some tools to battle inflation.
Economists can (and do) argue over just how permanent current inflationary pressures are. But they agree that consumer costs are soaring. Kiplinger forecasts 5.4% inflation through the rest of 2021, easing to 3% in 2022 – higher than the 2% average between 2016 and 2019.
Investors have some familiar tools to beat back inflation. Treasury inflation-protected securities come to mind first, and commodity funds and stocks tend to act as nice hedges as well.
The new-ish Horizon Kinetics Inflation Beneficiaries ETF (INFL), introduced in January, offers another, more diversified way to crack that egg. The exchange-traded fund has rapidly amassed $675 million in assets.
Inflation Beneficiaries invests in a roughly 50-50 split of domestic and international firms that are exposed – directly or indirectly – to assets that should increase in value alongside inflation, but that don't incur much in extra business expenses themselves.
"These companies do not need to spend a lot of money to earn their returns," says Todd Rosenbluth, head of ETF and mutual fund research for Wall Street research firm CFRA.
Materials-sector stocks such as miners Franco-Nevada (FNV) and Wheaton Precious Metals (WPM) make up 22% of INFL's assets, and the energy sector claims another 19%. But tops in the ETF are financial stocks – including German marketplace organizer Deutsche Börse and New York–based insurer and professional services firm Marsh & McLennan (MMC) – which make up nearly one-third of the portfolio.