The Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL), launched in May 2019, uses Treasury inflation-protected securities, or TIPS, and interest-rate derivatives to hedge against inflation and fixed-income volatility.
“While many investors aim to hedge inflation with commodities, stocks, or real assets, most look first at TIPS. The main problem with those inflation-indexed securities is their long duration, which means they are especially prone to lower prices when their yields rise”, says Nancy Davis, who heads IVOL and founded Quadratic Capital in 2013 after stints at Goldman Sachs and AllianceBernstein. “…IVOL adds fixed-income options to counter that duration risk, specifically ones based on the Treasury yield curve (in this case, the difference between the two- and 10-year notes).”
This article contains the opinion of the manager. It should not be regarded as investment advice