New TIPS ETF Aims To Protect Cash As Inflation Stays Stubborn

With inflation still weighing on investors' minds, F/m Investments has launched a new ETF designed to keep cash safe while offering inflation protection.

The F/m Ultrashort Treasury Inflation-Protected Security ETF RBIL focuses exclusively on ultrashort-duration TIPS (Treasury Inflation-Protected Securities), which are bonds that adjust for inflation but mature in 13 months or less.

While inflation has cooled from its 2022 peak, it remains above the Federal Reserve's 2% target. Meanwhile, over $7 trillion sits in money market funds, and another $18 trillion in bank deposits, earning interest but offering little inflation protection. RBIL provides a lower-risk alternative for investors who want to maintain their purchasing power without having to bear the volatility of traditional inflation hedges like gold or real estate.

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Many existing TIPS ETFs carry longer durations, meaning their value can drop when interest rates rise. "As inflation spiked in 2021 and 2022, many investors saw their TIPS ETFs underperform because of their inherent duration," said Alex Morris, CEO of F/m Investments. "RBIL's ultrashort duration is designed to solve that problem."

In 2021, investors poured record funds into TIPS (Treasury Inflation-Protected Securities) ETFs. However, the rapid inflation spike and the Fed's aggressive rate hikes led to rising yields, causing TIPS prices to drop despite inflation adjustments, according to a report by the Financial Times. In 2022, Bloomberg's total return TIPS index fell nearly 12%, almost matching the 12.5% decline in a comparable US bond index, even as inflation hit 6.45%, the report said.

The ETF tracks the Bloomberg U.S. Ultrashort TIPS 1-13 Months Total Return Unhedged USD Index and has an expense ratio of 0.25%.

For investors looking to protect their cash from inflation without taking on big risks, RBIL could be the right tool at the right time.

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