Considering that the Federal Reserve has been meeting this week, it’s safe to say that inflation is likely front-and-center on the minds of many advisors and investors. After all, energy prices and supply chain constraints have kept inflationary pressures far more persistent than the Fed would like.

Key Takeaways:

• The Federal Reserve just finished up its July meeting, opting to leave interest rates unchanged.
• However, with inflation continuing to pressure the economy and committee members pushing to hike rates soon, advisors may want to opt for more inflation protection in their portfolios.
• Real asset ETFs offer multiple ways of gaining total return while mitigating the brunt of inflation.

This week’s Fed meeting was one of the more closely-watched ones, as folks were largely uncertain about what the outcome would be. However, while the committee did opt to keep rates steady for now, three officials did dissent and vote for a rate hike. As such, rates remain the same as of now, but this could change in the coming months.

With this in mind, folks may want to reassess how much inflation protection is in their portfolios. As inflation persists, advisors should see growth strategies tailored for tough market conditions..

Time to Turn to Real Assets?

Real assets provide a broad solution for today’s market, protecting portfolios against inflation while supporting diversification and total return potential. Investors can build real asset exposure in several different ways, including through a diversified approach like the State Street Multi-Asset Real Return ETF (RLY).

RLY is an actively managed ‘fund of funds’ that invests in a variety of other real asset ETFs. This allows the fund to access a variety of different real asset sectors, such as natural resources, commodities, global infrastructure, and others. For those seeking a one-ticker solution to real asset exposure, RLY could be an appealing pick.

The Infrastructure Inflation Hedge

For investors looking to dial their real assets exposure into a more specific industry, the BNY Mellon Global Infrastructure Income ETF (BKGI) could offer a good use case.

Infrastructure companies are historically well-positioned to adapt to inflation because inelastic demand allows them to pass higher costs directly on to consumers.

BKGI amplifies the traditional infrastructure approach in two ways: by investing with a global lens and including non-traditional infrastructure companies as well. For BNY Investments, these non-traditional assets include communication services, real estate, and healthcare sectors. This broader approach can help the fund tackle differentiated means of total return.

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Don’t Overlook the Real Estate Opportunity Set

Real estate is another real asset that can perform well amid inflation. Like infrastructure companies, the real estate sector preserves its physical value and can pass costs down to consumers more effectively.

The Vanguard Real Estate ETF (VNQ) offers straightforward access to the real estate sector. This fund blends income and growth by investing in different slices of the market, including office buildings, hotels, and more.

These three funds illuminate how diverse the real asset opportunity set can be. Considering how murky the Fed’s inflation fight path forward is, now is a compelling time for advisors and investors to lean into these hedge options.

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