iShares, BlackRock‘s exchange traded fund business, recently launched two globally-orientated Treasury inflation-protected securities (TIPS) funds, which will compete directly with the SPDR DB International Government Inflation-Protected Bond ETF (WIP).
The two new funds will provide ETF investors with exposure to international sovereign debt while trying to mitigate the potential damage caused by rising inflation.
“Global inflation may be an increasingly important part of portfolio construction going forward, as recent monetary policy raises the risk of inflation abroad,” comments Russ Koesterich, the chief investment strategist at iShares’ parent BlackRock, in a recent press release. Koesterich singles out “the U.S., U.K., Canada and Australia in the developed world and China, India and Brazil in the emerging markets” as the most likely areas to experience rising inflation.
The iShares International Inflation-Linked Bond Fund (ITIP) tries to reflect the performance of the BofA Merrill Lynch Global ex-US Diversified Inflation-Linked Index. The fund has 37 holdings and has an expense ratio of 0.40%.
ITIP’s country allocations include: U.K. 14.16%, France 13.45%, Italy 7.92%, Japan 4.67%, Canada 4.53%, Mexico 4.51%, Sweden 4.46%, Australia 4.46%, Germany 4.40% and others 27.48%.
The iShares Global Inflation-Linked Bond Fund (GTIP) tries to reflect the performance of the BofA Merrill Lynch Global Diversified Inflation-Linked Index. The fund has 41 holdings and has an expense ratio of 0.40%.
GTIP’s country allocations include: U.S. 31.56%, U.K. 19.38%, France 11.24%, Italy 6.62%, Germany 3.08%, Canada 2.50%, Mexico 2.16%, Japan 2.13%, Sweden 1.79% and others 13.59%.
It should be noted that GTIP differs from ITIP only in that the latter excludes U.S. sovereign debt. The principal is adjusted according to official inflation readings based on indicators such as the Consumer Price Index for the U.S.
Click to enlarge
SPDR DB International Government Inflation-Protected Bond ETF
Max Chen contributed to this article.