New research from European fixed income ETF provider Tabula Investment Management Ltd (“Tabula”) reveals that 95% of investors surveyed recently expect inflation to rise higher than many leading market commentators predict over the next 12 months. Tabula conducted the survey with 100 wealth managers and institutional investors representing c.€100bn in assets under management from the UK, France, Germany, Italy and Switzerland.
With Chinese wages rising closer to Western levels, and other emerging economy wages expected to follow suit, 91% of professional investors interviewed believe an inflationary “demographic reversal” has started to tighten its grip – some 44% strongly agree with this view.
Tabula, whose US Enhanced Inflation UCITS ETF (BBG: TINF LN) provides exposure to both expected and realised US inflation in a single fund, found that many professional investors believe a number of reflationary factors will become even more important over the coming years.
97% of professional investors interviewed identified the shift from globalisation to autarky as putting pressure on inflation in the next three years. Similarly, 87% said the huge increases in capital expenditure expected over the next decade would contribute to inflation. 7 out of 10 cited loose monetary and fiscal policies as a further inflationary factor.
“The economic, fiscal and monetary policies implemented by governments around the world in response to the Coronavirus pandemic have contributed to a spike in inflation, but our research shows professional investors believe there are longer term demographic and political trends that may lead to a sustained period of rising prices,” said Tabula CEO Michael John Lytle. “Increasingly, professional investors not only need to focus on how to deliver growth and income within agreed risk parameters, but they will also have to focus on ways to address rising inflation.”
Tabula’s US Enhanced Inflation UCITS ETF is the only ETF in the market that provides exposure to both expected and realised US inflation in a single ETF. It does so by combining exposure to a US TIPS portfolio with exposure to US inflation expectations (7 to 10-year Breakevens). It already has over US$90m in assets under management, and is attracting growing interest from institutional investors and wealth managers across Europe. The ETF is available in different currencies across European exchanges.