The Inflation Beneficiaries ETF, created by Horizon Kinetics in January 2021, aims to capitalize on higher inflation rates. Portfolio manager James Davolos believes the fund is well-positioned for the current economic landscape. Despite the possibility of the Federal Reserve cutting rates this year, Davolos remains confident in the ETF's ability to thrive in an environment of sustained inflation between three and five percent.
Davolos emphasizes the importance of proper portfolio diversification in the face of rising inflation. The Inflation Beneficiaries ETF focuses on investing in companies that are considered “asset light” and “capital light.” Top holdings in the ETF as of April 30 include Wheaton Precious Metals, PrairieSky Royalty, and Viper Energy. While the ETF has underperformed the S&P 500 this year, Davolos believes that inflation-oriented ETFs offer more long-term stability compared to the current tech-centric megacap rally.
According to Davolos, investors need to embrace a new reality where inflation remains elevated for an extended period. He cautions against over-reliance on tech stocks, citing a potential reversal in the market as inflationary pressures persist. The Inflation Beneficiaries ETF has shown promising returns since its inception, with a 30% increase as of Friday's close.
The Inflation Beneficiaries ETF presents a unique opportunity for investors looking to navigate the challenges posed by a higher inflation environment. With a focus on “asset light” and “capital light” companies, the fund offers a strategic approach to portfolio diversification. Despite underperforming the S&P 500 in the short term, Davolos remains optimistic about the long-term stability and growth potential of inflation-oriented ETFs in the current economic landscape. As investors adjust to the new reality of sustained inflation, the Inflation Beneficiaries ETF stands out as a compelling option for those seeking to position their portfolios for future success.