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Beat Rate Hike & Inflation Fear With This New ETF (IRHG) (revised)
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Global X recently launched a new ETF to fight the ongoing interest rate hike and inflation worries. The name of the fund is Interest Rate Volatility & Inflation Hedge ETF (IRVH - Free Report) . Let’s take a look inside the fund and find out if the launch of the fund is time-sensitive.
Inside IRVH
The fund IRVH is expected to exhibit low correlation with equity, real estate and fixed income markets, making it a potential diversifier within a broader portfolio. The total number of holdings of the fund is 13. The fund charges 45 bps in fees.
By pairing Treasury Inflation-Protected Securities (TIPS) with over-the-counter (OTC) interest rate options, IRVH offers investors the ability to potentially hedge against inflation and benefit from falling short term interest rates and/or rising long term interest rates.
How Does It Fit In a Portfolio?
The world has shifted to an inflationary environment that will likely remain at elevated levels in the coming days. One of the fund’s components is TIPS. TIPS ETFs offer robust real returns during inflationary periods unlike its unprotected peers in the fixed-income world. These securities pay an interest on an inflated-principal amount (principal rises with inflation) and when the securities mature, investors get either the inflation-adjusted principal or the original principal, whichever is greater. As a result, both the principal amount and the interest payments will keep on increasing with rising consumer prices.
Investors should also note that such high inflation will bring about high interest rates. No wonder, most central banks including the Fed have been hiking rates. So, the launch of a product that helps investors counter both inflation and interest rates seems intriguing at the current level.
Competition
There are a lot of inflation-beating products in the market. These include TIPS ETF like iShares TIPS Bond ETF (TIP - Free Report) , Amplify Inflation Fighter ETF (IWIN - Free Report) , Harbor AllWeather Inflation Focus ETF (HGER - Free Report) , AXS Astoria Inflation Sensitive ETF (PPI) and JPMorgan Inflation Managed Bond ETF (JCPI). PPI charges 71 bps in fees, HGER charges 68 bps, JCPI charges 25 bps in fees and IWIN charges 85 bps in fees. The new fund CPII charges 70 bps in fees. In contrast, IRVH charges quite less.
There are lot of interest rate-hedged products too in the market. Global X itself recently launched a product called Global X Interest Rate Hedge ETF (IRHG). Some examples with the same investment objective are Simplify Interest Rate Hedge ETF (PFIX - Free Report) , iShares Interest Rate Hedged High Yield Bond ETF (HYGH - Free Report) , iShares Interest Rate Hedged Corporate Bond ETF (LQDH) andProShares Investment Grade-Interest Rate Hedged (IGHG).
(NOTE: We are reissuing this articxle to correct a mistake. The original version, published yesterday, July 19, 2022, should no longer be relied upon.)
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Beat Rate Hike & Inflation Fear With This New ETF (IRHG) (revised)
Global X recently launched a new ETF to fight the ongoing interest rate hike and inflation worries. The name of the fund is Interest Rate Volatility & Inflation Hedge ETF (IRVH - Free Report) . Let’s take a look inside the fund and find out if the launch of the fund is time-sensitive.
Inside IRVH
The fund IRVH is expected to exhibit low correlation with equity, real estate and fixed income markets, making it a potential diversifier within a broader portfolio. The total number of holdings of the fund is 13. The fund charges 45 bps in fees.
By pairing Treasury Inflation-Protected Securities (TIPS) with over-the-counter (OTC) interest rate options, IRVH offers investors the ability to potentially hedge against inflation and benefit from falling short term interest rates and/or rising long term interest rates.
How Does It Fit In a Portfolio?
The world has shifted to an inflationary environment that will likely remain at elevated levels in the coming days. One of the fund’s components is TIPS. TIPS ETFs offer robust real returns during inflationary periods unlike its unprotected peers in the fixed-income world. These securities pay an interest on an inflated-principal amount (principal rises with inflation) and when the securities mature, investors get either the inflation-adjusted principal or the original principal, whichever is greater. As a result, both the principal amount and the interest payments will keep on increasing with rising consumer prices.
Investors should also note that such high inflation will bring about high interest rates. No wonder, most central banks including the Fed have been hiking rates. So, the launch of a product that helps investors counter both inflation and interest rates seems intriguing at the current level.
Competition
There are a lot of inflation-beating products in the market. These include TIPS ETF like iShares TIPS Bond ETF (TIP - Free Report) , Amplify Inflation Fighter ETF (IWIN - Free Report) , Harbor AllWeather Inflation Focus ETF (HGER - Free Report) , AXS Astoria Inflation Sensitive ETF (PPI) and JPMorgan Inflation Managed Bond ETF (JCPI). PPI charges 71 bps in fees, HGER charges 68 bps, JCPI charges 25 bps in fees and IWIN charges 85 bps in fees. The new fund CPII charges 70 bps in fees. In contrast, IRVH charges quite less.
There are lot of interest rate-hedged products too in the market. Global X itself recently launched a product called Global X Interest Rate Hedge ETF (IRHG). Some examples with the same investment objective are Simplify Interest Rate Hedge ETF (PFIX - Free Report) , iShares Interest Rate Hedged High Yield Bond ETF (HYGH - Free Report) , iShares Interest Rate Hedged Corporate Bond ETF (LQDH) andProShares Investment Grade-Interest Rate Hedged (IGHG).
(NOTE: We are reissuing this articxle to correct a mistake. The original version, published yesterday, July 19, 2022, should no longer be relied upon.)