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Goldman Sachs launches a new Treasury Inflation Protected Security (TIPS), Goldman Sachs Access Inflation Protected USD Bond ETF (GTIP - Free Report) . The ETF employs a rules-based, smart beta technology (see: all the Inflation-Protected Bond ETFs here).
“In an inflationary economic environment, GTIP provides investors with a potential hedge through its innovative screening approach to TIPS bonds,” Michael Crinieri, GSAM’s Global Head of ETF Strategy, said in a note.
Inside GTIP
This new ETF is an addition to its access fixed income ETF suite and the fourth in this range. “The addition of GTIP further highlights the mission of our Access ETF lineup, providing investors with lower-cost bond funds” said Crinieri. The ETF tracks the FTSE Goldman Sachs Treasury Inflation Protected USD Bond Index.
The issuer believes that the smart beta approach will provide more liquidity and minimize exposure to factors that historically led to volatility and underperformance. The fund comprises 10 holdings that have at least one year to maturity and a minimum issue size of $5 billion outstanding. Per the prospectus, “on the run” or the newest issues for each security is excluded and the remaining securities are weighted to match the “weighted average real yield duration” of the universe of securities.
The effective duration for the fund is 7.49 years and the weighted average maturity stands at 7.91 years. Nearly, two-third of fund’s holdings has maturities of three-five years, five-seven years or seven-10 years.
Since its inception on Oct 4, the fund has amassed $6.2 million and charges an expense ratio of 0.12%.
How Does it Fit Into a Portfolio?
Slew of upbeat economic data and Hawkish Fed comments have led to a surge in treasury yields. The yield rose above 3.25% for the first time since 2011, igniting fears of inflationary pressure, leading to increased consumer cost, thereby killing their appetite for spending (read: Treasury Yields at New 7-Year High: ETF Strategies to Play).
Unemployment level is at 3.7% -- a nearly 50-year low. The U.S. services sector expanded at its fastest pace on record in September per the data from Institute for Supply Management and the ISM non-manufacturing index also rose to the highest level since the index was created in 2008. Added to this is the escalating tit-for-tat trade war between Beijing and Washington. These factors in combination is causing inflation to rise and keeping Fed on track for another rate hike this December (read: ETFs That Tend To Win & Lose When Rates Rise)
However, consumer prices rose less than expected in September. Per the Labor Department report, excluding volatile food and energy costs, the price index rose 2.2% over the past year, the same as in August, but below the 2.3% median estimate of economists surveyed by Bloomberg news. The index was up 0.1% sequentially. “Overall, these data support our baseline view of a gradual pickup in inflationary pressures,” Oxford Economics said in a note to its clients.
Competition
Inflation is an increasing concern making investors’ interested in products that provide a hedge against the same. The fund faces competition from ETFs like iShares TIPS Bond ETFTIPS, which has the largest assets under management in this space ($22.9 billion), Schwab U.S. TIPS ETF (SCHP - Free Report) , Vanguard Short-Term Inflation-Protected Securities ETF (VTIP - Free Report) and SPDR Barclays Capital TIPS ETF . TIPS, SCHP, VTIP and IPE have expense ratios of 0.2%, 0.05%, 0.06% and 0.15%, respectively.
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Goldman Sachs Launches TIPS ETF
Goldman Sachs launches a new Treasury Inflation Protected Security (TIPS), Goldman Sachs Access Inflation Protected USD Bond ETF (GTIP - Free Report) . The ETF employs a rules-based, smart beta technology (see: all the Inflation-Protected Bond ETFs here).
“In an inflationary economic environment, GTIP provides investors with a potential hedge through its innovative screening approach to TIPS bonds,” Michael Crinieri, GSAM’s Global Head of ETF Strategy, said in a note.
Inside GTIP
This new ETF is an addition to its access fixed income ETF suite and the fourth in this range. “The addition of GTIP further highlights the mission of our Access ETF lineup, providing investors with lower-cost bond funds” said Crinieri. The ETF tracks the FTSE Goldman Sachs Treasury Inflation Protected USD Bond Index.
The issuer believes that the smart beta approach will provide more liquidity and minimize exposure to factors that historically led to volatility and underperformance. The fund comprises 10 holdings that have at least one year to maturity and a minimum issue size of $5 billion outstanding. Per the prospectus, “on the run” or the newest issues for each security is excluded and the remaining securities are weighted to match the “weighted average real yield duration” of the universe of securities.
The effective duration for the fund is 7.49 years and the weighted average maturity stands at 7.91 years. Nearly, two-third of fund’s holdings has maturities of three-five years, five-seven years or seven-10 years.
Since its inception on Oct 4, the fund has amassed $6.2 million and charges an expense ratio of 0.12%.
How Does it Fit Into a Portfolio?
Slew of upbeat economic data and Hawkish Fed comments have led to a surge in treasury yields. The yield rose above 3.25% for the first time since 2011, igniting fears of inflationary pressure, leading to increased consumer cost, thereby killing their appetite for spending (read: Treasury Yields at New 7-Year High: ETF Strategies to Play).
Unemployment level is at 3.7% -- a nearly 50-year low. The U.S. services sector expanded at its fastest pace on record in September per the data from Institute for Supply Management and the ISM non-manufacturing index also rose to the highest level since the index was created in 2008. Added to this is the escalating tit-for-tat trade war between Beijing and Washington. These factors in combination is causing inflation to rise and keeping Fed on track for another rate hike this December (read: ETFs That Tend To Win & Lose When Rates Rise)
However, consumer prices rose less than expected in September. Per the Labor Department report, excluding volatile food and energy costs, the price index rose 2.2% over the past year, the same as in August, but below the 2.3% median estimate of economists surveyed by Bloomberg news. The index was up 0.1% sequentially. “Overall, these data support our baseline view of a gradual pickup in inflationary pressures,” Oxford Economics said in a note to its clients.
Competition
Inflation is an increasing concern making investors’ interested in products that provide a hedge against the same. The fund faces competition from ETFs like iShares TIPS Bond ETF TIPS, which has the largest assets under management in this space ($22.9 billion), Schwab U.S. TIPS ETF (SCHP - Free Report) , Vanguard Short-Term Inflation-Protected Securities ETF (VTIP - Free Report) and SPDR Barclays Capital TIPS ETF . TIPS, SCHP, VTIP and IPE have expense ratios of 0.2%, 0.05%, 0.06% and 0.15%, respectively.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>