AXS Astoria Inflation Sensitive ETF (PPI)
Aside from style factors, which capture returns and risk within an asset class, macroeconomic factors are designed to capture broad risk across asset classes. Macroeconomic factors can include things like credit risk, interest rates and liquidity.
Inflation hedged ETFs like the AXS Astoria Inflation Sensitive ETF (PPI) are among this latter group of macroeconomic focused funds.
PPI employs a unique multi-asset class approach to fighting inflation. The fund has the flexibility to invest in equities along with commodities and inflation protected bonds like TIPS.
Invesco S&P 500 Low Volatility ETF (SPLV)
If you’re on a rollercoaster, you presumably don’t mind being whipsawed. If you’re an investor, it’s not desirable.
The Invesco S&P 500 Low Volatility ETF (SPLV) aims to dampen market ups and downs by owning the 100 stocks within the S&P 500 with the lowest realized volatility over the past 12 months. Currently, defensive industries like consumer staples and utilities account for almost half of the SPLV’s industry sector exposure.
Another benefit of using volatility dampening funds like SPLV is they keep clients disciplined and invested in the market versus in panic-selling into cash.
Summary
Factor premiums can show up at different moments and in different places within the stock market. As such, astute advisors aim to keep clients diversified across the entire factor spectrum in order to capture the premium when it's there.
*Market performance is through Aug. 29.