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Touring Wrangell-St. Elias National Park

Characteristics of Inflation Hedging Investments

Source: The Handbook of Inflation Hedging Investments
Used with permission by the author Robert J Greer.
Copyright© 2006 by The McGraw-Hill Companies

Click here to see year-to-date returns for inflation hedging indexes

 

  Inflation-Linked Bonds Commodities Timber Gold Direct         Energy Real             Estate Active Asset Allocation
Correlation to inflation     
(How does it do during actual periods of inflation?)

 High High Medium High Medium Medium Medium
Correlation to inflation expectations
(How does it do in advance of actual periods of inflation?)		 High High Low High Medium Low Low
Diversification from stocks and bonds  
(Does it act differently from stocks and bonds?)		 Good Excellent Good Good Good Good Medium
Historical level of returns
(How has it done in the past?)		 Good from 1997 - 2004. Moderate thereafter Comparable to equity returns for 1970-2005 Good Only kept up with inflation Good Comparable to equities Better in volatile markets
Volatility 
(How much and how often does the price go up and down?)		 Low High Medium Medium High Medium Medium
Liquidity
(How easily and how quickly can it be bought or sold?)		 High High Low High Low Depends on vehicle used High if use liquid alternatives
Ease of implementation
(To what extent is special expertise or manager needed?) 		Easy for passive.  Requires specialized management for active, directly or through a fund. Requires a manager and/or use of derivatives to get index exposure. Requires a specialized manager, directly or through a fund. Relatively easy for passive exposure. Requires a specialized manager, directly or through a fund. Easy for REITS; more challenging for other vehicles. Requires specialized experts.

Bob Greer of PIMCO


Bob Greer is an Executive Vice President at PIMCO.  A global authority on professional commodities investing, Greer has published his work in numerous industry journals including Journal of Portfolio Management, Journal of Derivatives, Pension and Investments.  In his book The Handbook of Inflation Hedging Investments, Greer discusses the importance of inflation hedging, which hedges work best, and what percentages should be allocated to real return investments and to each specific investment.