Net flows into inflation linked ETFs hit a record of $4.4bn in May. FT notes that net flows into the ETFs from Jan-May 2021 are at $18bn, surpassing the $17.3bn 2020 full-year number. Inflation numbers in the US and globally have been on the rise in recent months and FT adds that the uptick in inflows underscores the protection investors want from inflation. Linkers protect against inflation by adjusting the principal higher with inflation and lower with deflation. At maturity, investors are paid the higher of the adjusted principal or the original principal. “It’s not only about buying TIPs [Treasury inflation-protected securities, backed by the US government], it’s also buying inflation-linked bonds and shorting [nominal] Treasury bonds,” said Vincent Denoiseux, head of ETF research and solutions at Lyxor.
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