FinEx launches US TIPS ETF on Moscow Exchange

May 28th, 2021 | By | Category: Fixed Income

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FinEx has launched a new ETF on Moscow Exchange offering exposure to US Treasury Inflation-Protected Securities (TIPS).

FinEx launches US TIPS ETF on Moscow Exchange

Investors accelerated their shift into inflation-protecting assets in May.

The FinEx US TIPS UCITS ETF (FXTP RM) comes with an expense ratio of 0.25% and is available to trade in rubles.

The fund tracks the Solactive US 5-20 Year Treasury Inflation-Linked Bond Index which consists of TIPS issued by the US government with remaining maturities between five and 20 years.

The index is rebalanced on a semi-annual basis with constituents weighted by market value.

TIPS differ from regular US Treasury bonds in that the principal amount of a TIPS issue is adjusted over time to reflect changes in the underlying Consumer Price Index. When they mature, the Treasury pays the original or adjusted principal, whichever is greater.

TIPS are designed to offer a real rate of return and, hence, provide a degree of protection against rising inflation. In an environment of elevated inflationary pressures, TIPS can play a role in helping to inflation-proof portfolios and deliver a real yield over and above inflation rates.

Demand for TIPS, as well as other perceived inflation-protecting assets such as gold, has accelerated in May following the release of a US Labor Department report which showed that the Consumer Price Index rose 4.2% in the year through April, its largest increase since September 2008.

The $28.4bn iShares TIPS Bond ETF (TIP US) from BlackRock, the world’s largest ETF providing exposure to US TIPS, has recorded net inflows of $1.2bn month-to-date (as of 28 May).

Increased fiscal spending under the Biden administration, ongoing monetary stimulus, and the Federal Reserve’s declared willingness to allow inflation to overshoot its target all highlight a growing need for investors to consider incorporating inflation-protection measures within their portfolios.

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