BlackRock, Inc has launched two new inflation-linked funds on the NYSE Arca. The new funds are the iShares Global Inflation-Linked Bond Fund (NYSE Arca: GTIP) and the iShares International Inflation-Linked Bond Fund (NYSE Arca: ITIP). GTIP and ITIP join the iShares Barclays TIPS Bond Fund (TIP) — the first TIPS ETF to come to market — and the more recently launched iShares Barclays 0-5 Year TIPS Bond Fund (STIP) on the iShares product line. In total, the four funds provide investors the ability to access inflation-linked bonds in the US as well as those from foreign countries.
“Just as investors use US TIPS to help protect domestic portfolios against inflation, they should consider using global inflation-linked bonds to help protect their global portfolios,” says Matthew Tucker, iShares Head of Fixed Income Investment Strategy at BlackRock. “A global investment approach requires a global inflation solution.
“Inflation-linked bonds from foreign countries operate much like US TIPS. While the calculation for adjusting principal and interest varies between countries, the concept is the same: the bonds are indexed to local consumer price indexes in order to help protect investors from the negative effects of inflation.”
Russ Koesterich, iShares Chief Investment Strategist at BlackRock, says: “Global inflation may be an increasingly important part of portfolio construction going forward, as recent monetary policy raises the risk of inflation abroad. Countries to watch include the US, UK, Canada, and Australia in the developed world and China, India and Brazil in the emerging markets.”
GTIP is benchmarked to the BofA Merrill Lynch Global Diversified Inflation-Linked Index, and is the first of its kind in the exchange traded fund marketplace. The fund provides one-stop-shop access to global inflation-linked bonds. It includes exposure to the US, the UK, France, Italy and Brazil.
ITIP is benchmarked to the BofA Merrill Lynch Global ex-US Diversified Inflation-Linked Index. The fund does not include exposure to the US, but rather sizeable allocations to the UK, France, Italy, Australia and Brazil, among other countries. It can be paired with iShares Barclays TIPS Bond Fund (TIP) as part of a global inflation-linked bond strategy.