The Inflation Beneficiaries ETF, created by Horizon Kinetics in January 2021, has been designed to thrive in an environment of rising inflation. Despite the possibility of the Federal Reserve cutting rates this year, James Davolos, the firm’s portfolio manager, remains confident in the ETF’s positioning. He believes that the fund is well-prepared for the “mature phase of inflation” that the world is currently entering. Davolos foresees inflation rates ranging from three to five percent, a scenario where the Inflation Beneficiaries ETF can truly shine.
According to Davolos, the goal of the Inflation Beneficiaries ETF is to diversify investors’ portfolios effectively in an environment where inflation is expected to persist at higher levels. The fund achieves this by investing in companies that are asset-light and capital-light, offering a strategic advantage in the current economic landscape. Some of the top holdings of the ETF, as of April 30, include Wheaton Precious Metals, PrairieSky Royalty, and Viper Energy, showcasing a well-rounded portfolio that is positioned to benefit from inflationary pressures.
While the Inflation Beneficiaries ETF may have underperformed the S&P 500 so far this year, Davolos remains optimistic about its long-term prospects. He believes that investments in inflation-oriented ETFs offer more stability over time compared to the current tech-heavy megacap rally. Davolos points out that as the market adjusts to the reality of sustained higher inflation, there is likely to be a significant reversal in favor of funds like the Inflation Beneficiaries ETF. This shift in investment trends could potentially lead to substantial gains for investors who have positioned themselves strategically.
As of the latest data, the Inflation Beneficiaries ETF has seen a 30% increase since its inception, indicating a positive trajectory for the fund. Despite initial underperformance relative to the S&P 500, Davolos’s confidence in the ETF’s ability to deliver long-term gains remains unwavering. With a focus on companies poised to benefit from persistent inflationary pressures, the Inflation Beneficiaries ETF stands as a strategic tool for investors looking to navigate the evolving economic landscape effectively.