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Inflation ETF Portfolio

Potential Opportunities During Times of High Inflation

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Why an Inflation ETF Portfolio?

Inflation affects all investment portfolios. That’s because high inflation erodes the value of money, so the real return on an investment is the return after inflation. While inflation has fallen since spiking in 2022, there are no guarantees it won’t rise again, especially as government debt climbs to relatively high levels in some countries.

An Inflation ETF portfolio is not a specific product, but rather a way of describing a collection of exchange-traded funds that provide exposure to asset classes or sectors that have historically shown sensitivity to inflationary trends. Examples might include funds invested in commodities, real estate, or companies with pricing power. Such an allocation aims to help preserve purchasing power, though neither returns nor full protection against inflation are guaranteed.

An Inflation ETF portfolio can help to safeguard investor spending power (though neither returns nor full protection against inflation are guaranteed). Various asset classes could help achieve this goal, but it’s also possible to combine several equity ETFs that historically responded well to inflationary pressures. Nevertheless, investing is subject to risk, including the possible loss of principal. For complete information on risks, please refer to the KID/KIID and the prospectus of the funds.

  • Three Investment Truths for Safeguarding against Inflation
  • What is Inflation?
  • An inflationary environment inevitably leads to a decline in the purchasing power of consumers
  • Investors may turn to financial markets looking for potential protective measures from inflationary pressures, such as a decline in real income
  • Certain asset classes, including inflation-protected bonds, commodities, and certain equity sectors, could all belong to an Inflation ETF portfolio
  • Inflation is a general increase in the prices of goods and services in an economy
  • The common measure of inflation is the inflation rate, the year-on-year change in a general price index
  • Inflation can also be measured by the Consumer Price Index (CPI)
  • Changes in measured CPI track changes in price over time

After its 2022 Spike, Inflation in Europe and the US is Subdued for Now

Inflation in the United Kingdom

Source: ECB, January 1997 – July 2025.

Inflation in the United Kingdom

Source: Office for National Statistics, June 1959 – July 2025

Inflation in the United States

Source: U.S. Bureau of Labor Statistics, June 1959 – July 2025.

Looking at Various Asset Classes

When prices rise rapidly, many investors realize that keeping money in a current account generating little to no interest is similar to simply giving away part of their savings. In many cases, investing those savings, for instance via an Inflation ETF, might sound like a viable solution. With so many options on the market, it is necessary to understand the historical behavior of various asset classes and associated risks. Nevertheless, it is worth remembering that past performance does not predict future performance.

  • Fixed Income
  • Equities
  • Real Estate
  • Commodities

Fixed income is typically viewed as a stabilizing element in portfolios, but this might not be the case in inflationary times. Bonds are less likely to give any protection when prices rise, as central banks usually respond to high inflation by raising interest rates1. On top of that, the expected payout at the end of the period is fixed and won’t be adjusted no matter how high the inflation has reached, leaving investors exposed to both falling bond values and eroded purchasing power.


1 Source: NBER, https://www.nber.org/digest/202209/which-asset-classes-provide-inflation-hedges

Equities have often shown resilience in times of moderate and stable inflation as good management can often raise prices, leading to higher revenues2. This has tended to be true of companies with pricing power – in other words, those with a sufficiently robust competitive position to raise prices, although not all sectors or firms are able to protect margins when costs rise quickly or when valuations come under pressure from higher interest rates.


2 Source: CFA Institute, July 2021.

Rent increases have typically risen at the same time as consumer prices, although there may be a time lag. On the other hand, rising interest rates can reduce property values, which would affect short-term investors3. Yet hedging against inflation through buying real estate directly brings a high barrier to entry, as well as the complications of low liquidity. A simpler way to get exposure is through the stocks of real estate companies.


3  Source: Mortgage Point, February 2025.

Commodities can fulfill their role in inflation hedging in two ways. First of all, their intrinsic value rises when prices for consumer goods rise. They also react faster to unexpected inflation than many other asset classes. Yet, secondly, their return is less correlated with broad equity or bond markets and can diversify a portfolio4. It is important to mention that investing in commodities via derivatives is difficult for ordinary investors – it’s more straightforward to buy shares in commodity producers, for example, mining companies or oil services as a proxy. An Inflation ETF focused on commodity producers can be a possible choice for low-cost diversification, though commodity markets remain highly volatile and sensitive to geopolitical and supply disruptions.


4 Source: CME Group, June 2022.

Commodities

Potential Components of the Inflation ETF Portfolio

Investors can get exposure to stocks with the potential to protect against inflation through an Inflation ETF. Whether because of companies being able to raise prices, value adjustments, or commodities’ countercyclical qualities, the Dividend ETF, Real Estate ETF, and Commodity ETF have historically performed comparatively well during some inflationary periods, as discussed further. Even though investing in equities is risky and history is an imperfect guide to the future, investors might consider them for a portfolio of Inflation ETFs. Investments are subject to risk, and loss of capital is possible.

Dividend ETF
Public companies have the flexibility to increase their dividends when inflation rises...
Real Estate ETF
Periods of high inflation lead to ascending rents, which move higher alongside...
Global Mining ETF
Commodities are potential hedges against inflation, performing well when consumer goods...

Allocation of an Inflation ETF Portfolio

No two inflationary cycles are the same. That means different types of assets are most successful for protecting against inflation in each cycle. As a result, investors may be better off investing across several portfolios to diversify the risks.


Potential Inflation ETF Portfolio Allocation


Source: VanEck.

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