The Fed would have us believe that inflation is under control and will remain that way. World food prices have a different idea and even Mr. Bernanke acknowledges that inflation is now impacting emerging markets in a big way. So it stands to reason that mutual fund companies would introduce more products to address the inflation concern.
The ING Floating Rate Fund (IFRAX) is relatively new and is marketed to investors who are looking to hedge against a future rise in interest rates. (Presumably, inflation and increased interest rates will go hand-in-hand. At least that’s the way it is supposed to work.) This fund carries out this method by investing in ultra-short duration floating rate loans that reset every 30, 60 or 90 days. Thus, the fund is less affected by rising interest rates compared to other fixed income funds. I’m not so sure that this strategy can even stay even with high inflation, so I would not call this a true real-return fund.
There are other real-return funds available from a variety of fund companies. Most mix in a variety of assets that historically have increased in value in coordination with inflation, e.g., commodities. I own one of these, the PowerShares DB Commodity Index Tracking ETF (DBC). This fund is up 28% in the last six months, if that tells you anything about recent trends in inflation concerns and commodity prices.
My other primary inflation-fighting assets are I-Bonds, TIPS, and a TIPS fund (VIPSX). The latter fund has been on a general negative trend of late but I think that is about to change.
What are you investing in to address inflation? Or is that not a concern of yours?