Hedging Against Inflation with RAAX
January 13, 2022
Read Time 2 MIN
Rising prices and inflationary fears have been driving interest in hedging against growing inflation. Investors can look to the VanEck Inflation Allocation ETF (RAAX), which primarily invests in assets that may benefit from higher inflation, as a means to position against the pernicious effects of an inflationary environment. A combination of active management and rules-based exposure makes RAAX a powerful tool for investors.
Don’t let Inflation keep you down
RAAX provides exposure to real assets while seeking to minimize the impact of drawdowns. Real assets can potentially help investor’s combat rising inflation, enhance portfolio diversification, and participate in global growth.
Focus on extracting real returns
RAAX offers comprehensive exposure across commodities, natural resource equities, REITs, MLPs and infrastructure. The Fund seeks to be responsive to changing market environments, including the ability to allocate 100% to cash during market stress, and an optimized allocation process providing exposure to segments with positive expected returns while managing overall portfolio risk.
Stay protected across changing conditions
Average 12-Month Return Under Varying Inflation Rates (1970 - 2017)
Source: Bloomberg; FactSet; CRSP; FRED; VanEck. Data as of December 31, 2017. Past performance is not indicative of future results. Index returns are not representative of fund returns. Investors cannot invest directly in an index. Please see disclosures for index representing each sector.
Hedge against inflation surprise
Average 12-Month Return in Periods of Positive Inflation Surprise (2003 - 2017)
Source: Bloomberg; FactSet; CRSP; FRED; VanEck. Data as of December 31, 2017. Past performance is not indicative of future results. Analysis conducted for time periods between December 2002 to December 2017 based upon availability of data. “Positive Inflation Surprise” determined by months where a year-over-year percent change in inflation (as measured by CPI-U) was higher than 1-year-ahead forecasts from University of Michigan’s inflation survey. The average period length of inflationary surprise from 2003 to 2017 was approximately 8.5 months (max = 14 months, min = 4 months) with the first period occurring in May 2005 and the last occurring in December 2011.
“Natural Resource Equities” represented by a blended index of CRSP’s Oil, Petroleum, Mines, Gold, Steel, Agriculture and Wood Average Value-Weighted Industry Portfolios obtained from the Kenneth R. French data library. “Energy Equities” represented by a blended index of CRSP’s Oil and Petroleum Average Value-Weighted Industry Portfolios. “Diversified Mining Equities” represented by CRSP’s Mines Average Value-Weighted Industry Portfolio. “Gold Equities” represented by CRSP’s Gold Average Value-Weighted Industry Portfolio. “Commodities” represented by the S&P® GSCI Total Return Index. “Oil” represented by the spot WTI crude price (as sourced from the Federal Reserve of Saint Louis or “FRED”) “Industrial Metals” represented by the S&P GSCI – Industrial Metals Index from January 1977 to December 2016 and a blended index of Copper, Aluminum, Nickel, Zinc, and Tin commodity price returns from January 1970 to December 1976. “Gold” represented by the gold spot price index. “U.S. Equities” represented by S&P 500® Total Return Index; “U.S. Bonds” represented by the Bloomberg Barclays U.S. Aggregate Bond TR Index from January 1976 to December 2016, the Bloomberg Barclays U.S. Aggregate Government/Credit TR Index from February 1973 to December 1975, and a blended index of Morningstar’s U.S. Intermediate Government Bond and U.S. Long-Term Corporate Bond Indices from January 1970 to January 1973; “Infrastructure” represented by the Dow Jones Brookfield Global Infrastructure Composite TR Index; “Real Estate” represented by the FTSE NAREIT All Equity REITs Index; “TIPS” (Treasury Inflation-Protected Securities) represented by the Barclays U.S. TIPS Index.
Bloomberg Barclays U.S. Aggregate Bond TR Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency). Bloomberg Barclays U.S. Aggregate Government/Credit TR Index is a broad-based benchmark that measures the performance of U.S. Dollar denominated U.S. Treasuries, government-related and investment grade U.S. corporate securities that have a remaining maturity of greater than one year. Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index includes all publicly issued, U.S. Treasury inflation protected securities (“TIPS”) that have at least one year remaining maturity, are non-convertible, are denominated in U.S. dollars, are rated investment grade (at least Baa3 by Moody’s Investors Service or BBB- by S&P), are fixed rate, and have more than $250 million or more par value outstanding. Consumer Price Index for All Urban Consumers (All Items) is a measure of the average change in the price for goods and services paid by urban consumers between any two time periods. It can also represent the buying habits of urban consumers. This particular index includes roughly 88 percent of the total population, accounting for wage earners, clerical workers, technical workers, self-employed, short-term workers, unemployed, retirees, and those not in the labor force. The CPIs are based on prices for food, clothing, shelter, and fuels; transportation fares; service fees (e.g., water and sewer service). Dow Jones Brookfield Global Infrastructure Composite TR Index is designed to measure the performance of pure-play infrastructure companies domiciled globally and across all sectors of the infrastructure market. FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. Equity REITs. Constituents of the Index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property. Morningstar U.S. Intermediate Government Bond Index is an unweighted index that measures the performance of U.S. Treasury and U.S. Government Agency bonds with maturities between four and seven years. Morningstar U.S. Long-Term Corporate Bond Index is an unweighted index that measures the performance of U.S. corporate bonds with maturities of seven years or longer. MSCI ACWI Commodity Producers Index is a free float-adjusted market capitalization index designed to reflect the performance of listed commodity producers across three industry (or sub-industry) categories as defined by the Global Industry Classification Standard: energy, metals, and agriculture. S&P 500® Index is widely regarded as the best single gauge of large-cap U.S. equities. The index is a float-adjusted, market-cap-weighted index of 500 leading U.S. companies from across all market sectors including information technology, telecommunications services, utilities, energy, materials, industrials, real estate, financials, health care, consumer discretionary, and consumer staples. S&P® GSCI Total Return Index is a world production-weighted commodity index comprised of liquid, exchange-traded futures contracts and is often used as a benchmark for world commodity prices. S&P® North American Natural Resources Sector Index is a modified capitalization-weighted index which includes companies involved in the following categories: extractive industries, energy companies, owners and operators of timber tracts, forestry services, producers of pulp and paper, and owners of plantations.
An investment in the VanEck Inflation Allocation ETF (RAAX) may be subject to risks which include, among others, fund of funds risk which may subject the Fund to commodities, gold, natural resources companies, MLPs, real estate sector, infrastructure, equities securities small- and medium-capitalization companies, foreign investments, emerging market issuers, foreign currency, credit, high yield securities, interest rate, and call risk, all of which may adversely affect the Fund. RAAX may also be subject to affiliated fund, U.S. Treasury Bills, subsidiary, commodity regulatory, tax, liquidity, gap, cash transactions, high portfolio turnover, model and data, management, operational, authorized participation concentration, absence of prior active market, trading issues, market, fund shares trading, premium/discount, and liquidity of fund shares, and non-diversified risk. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors. Diversification does not assure a profit nor protect against loss.
Benchmark index returns are not Fund returns and do not reflect any management fees or brokerage expenses. Investors cannot invest directly in the Index. Returns for actual Fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses. Index returns assume that dividends have been reinvested.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
Van Eck Securities Corporation, Distributor
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New York, NY 10017
April 13, 2022
A diversified mix of inflation-fighting assets are key to successfully navigating the current inflationary environment.
March 10, 2022
As elevated inflation persists, we believe that the diversification and return benefits of real assets will become more and more apparent.
January 21, 2022
RAAX may provide a means to fight inflation through real assets, in particular, gold equities.
January 13, 2022
VanEck's Guided Allocation Suite is designed to participate meaningfully in bull markets and seek to de-risk in bear markets by minimizing the impact of market downturns.