Two of IndexIQ’s exchange-traded funds marked their third anniversaries on 27 October: the IQ Global Resources ETF (GRES) and the IQ Real Return ETF (CPI).
GRES is the broadest commodities and natural resources ETF, including: livestock; precious metals; grains, food and fibre; energy; industrial metals; plus timber, water, and coal.
GRES is based on an index with over five years of live history, designed to reweight its allocations to individual commodity sectors monthly with a goal to “buy low and sell high.” The fund is diversified both geographically and by sector.
This methodology has made GRES among the highest performing ETFs in the commodities and natural resources category during its three-year live history, as well as exhibiting among the lowest levels of volatility in its class.
“We designed GRES to provide exposure to the full spectrum of the commodity universe and it remains the broadest commodity ETF available to investors,” says IndexIQ chief executive Adam Patti. “It is also the only broad-based commodity equity ETF to provide exposure to timber, water and coal. We designed GRES to help solve what we believe to be significant structural issues of other leading commodity products, including the deleterious effects of contango and backwardation, the issuance of K-1s for the derivative-based ETFs, the significant overweight of energy inherent in many of the other competing products, and the high correlation to broad equities and high volatility that the equity-based commodity products exhibit. GRES has accomplished all of these goals through in its three-year track-record, as well as the five-year track-record of its underlying index.”
CPI also began trading on 27 October 2009 and is based on an index designed to provide investors with a hedge against the US inflation rate by providing a “real return,” or return above the rate of inflation, as represented by the Consumer Price Index (CPI).
CPI provides exposure to 12 asset classes, including broad commodities, gold, oil, US government short-, intermediate-, and long-term maturity obligations; US real estate; foreign currencies and currency futures; foreign equity; and US large and small cap equity. Investors have gravitated to CPI for use as an alternative to long-term cash holdings or in lieu of other short-term fixed income holdings.
“CPI was created in part as an alternative to Treasury Inflation Protected Securities (TIPS), which we believe to be an insufficient hedge against inflation,” says Patti. “Our research has shown that a multi-asset approach to inflation hedging tends to be more effective than the exposure offered by TIPS and we’re pleased with the track record that CPI has been able to develop over the last three years. CPI has accomplished its goal of providing approximately two to three per cent return above that of short term fixed income, with a consistent volatility profile of approximately two per cent.”