It’s often said that there’s an exchange traded fund for every occasion and that sentiment is increasingly relevant to macroeconomic conditions.
Indeed, the ETF universe is increasingly refined and among the nuanced offerings that are highly relevant today are funds that capitalize on rising interest rates. Some of those strategies have been around awhile and are battle-tested. With that in mind, it was just a matter of time before an intrepid ETF issuer designed a fund tied to rising inflation.
As its name implies, the aptly tickered PPI conquers one of the primary battles facing new ETFs of all stripes: Immediate relevance/good timing. PPI is checking those boxes with aplomb not only because inflation shows no signs of cooling over the near-term, but also because it took the fund just 70 trading days to reach $70 million in assets under management.
Inside PPI Success
As advisors well know, the ETF landscape is dominated by passive, index-based products. However, active funds are rapidly growing in the ETF world and PPI is a prime example of strategy that’s conducive to active management.
PPI “is an actively managed, broadly diversified ETF that seeks long-term capital appreciation in inflation-adjusted returns. Renowned ETF experts at Astoria Portfolio Advisors manage PPI by investing where the opportunities are: cyclical stocks (such as financials, energies, industrials and materials), commodities and TIPS,” according to AXS.
As noted above, it takes multiple asset classes to adequately position clients to thrive during inflationary times. However, positioning client portfolios in all of those asset classes can be costly in terms of, sap capital and can be, overall, inefficient. PPI ameliorates that situation.
Currently, the inflation-fighting ETF features exposure to commodities, equities and TIPS. The bulk of the fund’s commodities and fixed income exposure is sourced via other ETFs, making PPI highly efficient while allowing it to keep its expense ratio tolerable for a product of this nature (0.71% per year).
As for PPI’s individual equity exposure, that’s comprised of domestic and international cyclical equities, a significant portion of which hail from the energy sector, though PPI also has allocations to financial services, industrial, materials and real estate names.
PPI Delivering the Goods
When a fund like PPI comes to market, particularly when the time is right for such a debut, it has to deliver the goods in terms of performance. That’s particularly important for ETFs that don’t bear one of the big brand names. Fortunately, PPI is doing its job.
“By percent asset growth, PPI is the third-fastest growing ETF of the year. After launching on December 30 of last year, the ETF has quickly gained traction with investors, with over $70 million in net flows in its first 70 trading days,” according to AXS Investments. “The PPI ETF was up 13.88% year-to-date through May 30, with the S&P down -19.27% during that period. The PPI ETF was the highest-performing fund over that period in the ETF's Morningstar Category out of 440 funds.”
The Point: PPI’s start is undoubtedly encouraging and advisors and clients can use all the good vibes they can get when it comes to battling inflation.