ETF Chart of the Day: Inflation, Deflation

A niche that falls somewhere under “Alternatives” in the ETP landscape remains largely undiscovered in terms of invested assets currently, and we are referring to “Inflation Focused” products.

We see six products currently that fall under this realm, and the biggest fund in terms of asset size DEFL (PowerShares DB U.S. Deflation ETN, Expense Ratio 0.75%) only has about $4.1 million in AUM.

On the flipside, PowerShares also offers INFL (PowerShares DB U.S. Inflation ETN, Expense Ratio 0.75%), which has $3.58 million in assets under management currently. ProShares has listed some products in this greater realm of “Inflation” focused vehicles, in FINF (ProShares Short 30 Year TIPS/TSY Spread, Expense Ratio 0.75%), RINF (ProShares 30 Year TIPS/TSY Spread, Expense Ratio 0.75%), SINF (ProShares UltraPro Short 10 Year TIPS/TSY Spread, Expense Ratio 0.75%), and UINF (ProShares UltraPro 10 Year TIPS/TSY Spread, Expense Ratio 0.75%), but none of these funds has greater than $3.8 million in assets currently, and every single ETP in this space literally averages only a few hundred shares traded daily(making for extremely ugly technical charts, as the one seen below).

These products are not exactly “brand new” to the marketplace either, more like “relatively new” as most debuted in the late 2011/early 2012 timeframe.

Based on the lack of activity, it just seems that this particular investment niche has not had its day in the sun yet, and perhaps investment advisors and institutions that might benefit from such Inflation focused products will need further education and information about how the products would ideally be positioned in portfolios.

It is important to note here that some of the aforementioned products are ETNs and others use leverage or an inverse/inverse leveraged strategy to deliver returns, and proper due diligence should be performed on the strategies before any implementation.

Of secondary concern is the actual trade-ability of these products should one be identified for implementation in an ETP portfolio. Noting the sometimes very wide spreads, almost non-existent trading volume, and sparse visual liquidity on the screens that these products display typically, the utilization of a professional trading desk would be highly recommended when investing in such products, especially with institutional sized dollar allocations.

INFL/DEFL Repurchase History

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