The one-two punch of inflation and interest rates have been the biggest storylines for markets over the last year or so. Now, with the Fed appearing set to hold rates this week, the conversation has turned heavily towards inflation as the key challenge for markets. That may inspire investors to look towards ETFs that can do well in inflationary periods. The Avantis Inflation Focused Equity ETF (AVIE ) may appeal.
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AVIE, which will hit its three-year ETF milestone next year, charges 25 basis points (bps) for its efforts. The strategy invests in sectors or industries that tend to outperform during inflationary periods. AVIE invests in firms of all market capitalizations. It assesses companies based on valuation metrics, outstanding shares, book value, and cash flows.
The active inflation ETF overweights securities with smaller market caps, higher profitability, and lower valuation. AVIE has returned 18.3% over one year per Avantis Investors data. Over the last month, it has returned 5.6%, outperforming its benchmark.
Currently, AVIE’s top three sectors based on its holding analysis include energy minerals, health technology, and finance. Its approach has helped its price rise above its 50-day Simple Moving Average (SMA) per YCharts, too, which helps indicate momentum.
Active Inflation ETF AVIE's Role
An active ETF like AVIE could help in a shifting inflationary environment. Not only does it appeal thanks to its lean towards inflation-friendly sectors, but it also offers quite a bit with its active approach. Active investing empowers managers to overweight or underweight stocks with more flexibility than index-following ETFs can. What’s more, active managers bring significant attention and experience to managing their strategies.
The inflationary picture looms as one of the key challenges for investors for this year and potentially in 2025, too. Adding exposure to an active inflation ETF now could prove to be an intriguing play as 2023 nears its halfway point.
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