Figure 3: 2004 to 2007 Inflationary period
Figure 4: 2011 to 2012 Inflationary period
Figure 5: 2016 to 2018 Inflationary period
Figure 6: 2021 to present Inflationary period
TIPS often provided total return less than CPI during inflationary periods, suggesting the tactical opportunity to use TIPS in a portfolio specifically for an inflation hedge may not always live up to expectations. The multi-asset approach that includes TIPS as a core of the allocation, on the other hand, exhibited more potential to hedge against inflation during periods of CPI over 2%. For the longer-term core-position use case, the multi-asset approach has a significant allocation to TIPS (60%) to serve as a ballast during periods of stagflation or lack of inflation, especially benefitting when rates fall, which has shown to be the case when the Fed intends to encourage higher inflation from lower CPI prints.
One approach to a multi-asset inflation hedge includes the IndexIQ Real Return ETF, ticker CPI. IndexIQ’s ETF CPI tracks the Bloomberg IQ Multi-Asset Inflation Index, which seeks to provide exposure to equity, fixed income and commodity assets expected to benefit directly or indirectly from increases in the prices of goods and services (eg., inflation). The index is comprised of U.S. Treasury Inflation Protected Securities (TIPS) of short-, medium-, and long-terms, U.S. large capitalization equities securities, and commodities.
*Past Performance is no guarantee of future results, which will vary. It is not possible to invest directly in an index. All data Morningstar as of 4/30/22 except Consumer Price Index and Federal Funds Rate data from St. Louis Fed at fred.stlouisfed.org.
Before considering an investment in the Fund, you should understand that you could lose money. The Fund’s investment performance, because it is a fund of funds, depends on the investment performance of the underlying ETFs in which it invests. There is no guarantee that the Fund itself, or any of the ETFs in the Fund’s portfolio, will perform exactly as its underlying index. Debt Securities Risk: In general, the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible. Commodities Risk: Exposure to the commodities markets may subject the Fund to greater volatility than investments in traditional securities, and exposure to commodities, directly or through other securities, can cause the value of the Fund’s assets to decline or fluctuate in a rapid and unpredictable manner. Derivatives Risk: Derivatives often involve a high degree of financial risk in that a relatively small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable as well as favorable, in the price of the derivative instrument. Investments in derivatives may increase the volatility of a fund’s net asset value and may result in a loss to the fund. Credit Risk: the possibility that the bond issuer may fail to pay interest and principal in a timely manner. Inflation-Protected Security Risk: The value of inflation protected securities, including TIPS, generally will fluctuate in response to changes in “real” interest rates, generally decreasing when real interest rates rise and increasing when real interest rates fall. Large Inflation Capitalization Companies Risk: Large-capitalization companies may be less able than smaller capitalization companies to adapt to changing market conditions. Large-capitalization companies may be more mature and subject to more limited growth potential compared with smaller capitalization companies. During different market cycles, the performance of large-capitalization companies has trailed the overall performance of the broader securities markets.
Duration indicates the years it takes to receive a bond’s true cost, weighing in the present value of all future coupon and principal payments.
The Bloomberg TIPS Index is designed to measure the performance of the inflation protected public obligations of the U.S. Treasury, commonly known as “TIPS.”
The Multi-Asset Index represents a combination of: 30% Bloomberg TIPS Index, 30% Bloomberg Short Term TIPS Index, 30% Bloomberg Inflation-Sensitive Equity Index, and 10% DBIQ Diversified Commodity Index.
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
The Federal Funds Rate, referred to as the “overnight rate,” is the annualized rate that is paid on Federal Reserve Bank balances, and is determined by the Federal Open Market Committee.
The Treasury Curve refers to the price difference between long term Treasury rates and short term Treasury rates; a smaller difference suggests a flatter curve than a larger difference in rates.
Equity Market Beta is a measurement that compares the volatility of returns of an investment against those of the broader market.
All data sourced from Morningstar as of 4/30/22 with the exception of Consumer Price Index and Federal Funds Rate data which was sourced from the St Louis Fed at fred.stlouisfed.org.
Consider the Fund's investment objectives, risks, and charges and expenses carefully before investing. The prospectus and the statement of additional information include this and other relevant information about the Fund and are available by visiting www.newyorklifeinvestments.com or calling 888-474-7725. Read the prospectus carefully before investing.
"New York Life Investments" is both a service mark, and the common trade name, of certain investment advisors affiliated with New York Life Insurance Company. IndexIQ® is the indirect wholly owned subsidiary of New York Life Investment Management Holdings LLC and serves as the advisor to the IndexIQ ETFs. ALPS Distributors, Inc. (ALPS) is the principal underwriter of the ETFs, and NYLIFE Distributors LLC is a distributor of the ETFs. NYLIFE Distributors LLC is located at 30 Hudson Street, Jersey City, NJ 07302. ALPS Distributors, Inc. is not affiliated with NYLIFE Distributors LLC. NYLIFE Distributors LLC is a Member FINRA/SIPC.