This is an exchange-traded fund designed to profit from higher interest rates.
But even if the Fed starts cutting interest rates this year, Horizon Kinetics’ James Davolos thinks his company Inflation Beneficiaries ETF (INFL) At its best.
“We’re actually entering a mature stage of inflation,” Davolos, a portfolio manager at the firm, told CNBC’s “ETF Edge” this week. “I think we’re actually in an ideal position.”
Davolos expects inflation in the new world to remain between three and five percent.
“The Fed basically just admitted last week that we are going to prioritize the economy and jobs and accept higher inflation levels,” Davolos said. “I don’t think most portfolios are properly designed for that.”
Horizon Kinetics created the Inflation Beneficiary ETF in January 2021, when inflation began to rise following the Covid-19 pandemic quarantines. Today, Davolos sees the fund as a strategic tool to help investors diversify their portfolios.
Davolos said the ETF’s goal is to buffer the portfolio in a longer-term higher environment by investing in companies that are considered “asset-light” and “capital-light.”As of April 30, FactSet showed that the top holdings of the Inflation Beneficiary ETF included Wheaton Precious Metals, Prairie Sky Royalty and Viper Energy.
So far this year, the ETF has underperformed S&P 500 Index About five percent. But Davolos believes the gains from inflation-oriented ETFs offer more long-term stability than the current surge in mega-cap stocks.
“We’re in a new reality. People keep buying science and technology, “There’s no realization that we’ve been up much longer and that these names have a duration. So I expect that to continue to reverse, and to reverse sharply, as the rest of the year goes on,” Davolos said.
As of Friday’s close, the Inflation Beneficiary ETF was up 30% since its inception.
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