Exchange-traded funds designed to protect against inflation are staring down a record exodus after faltering in the face of still-sticky price pressure.
Nearly $17 billion has exited from Treasury-inflation securities ETFs over 10 consecutive months of outflows, an unprecedented streak in data going back to 2016, Bloomberg Intelligence data show. The biggest such fund, the $21.6 billion iShares TIPS Bond ETF (ticker TIP), is on track to bleed another $1.5 billion this year after investors pulled nearly $10 billion in 2022.
That rush to the exits follows a bruising stretch of underperformance for the asset designed to protect against inflation. While TIPS weather against price erosion, real yields — which strip out the impact of inflation — have soared over the past year, shredding returns even as price pressures remain stubbornly high. That soured the appetite of investors who piled into TIP and similar ETFs to curb inflation.
“You got killed and, in many cases, underperformed nominal Treasuries of similar maturities by owning TIPS,” Laird Landmann, TCW Group co-director of fixed income, said on Bloomberg Television’s Real Yield. “So it really has been a bad ride and it’s not surprising the retail side of the equation bailing out of the ETF at this point.”
The $11.5 billion Schwab U.S. TIPS ETF (SCHP) is leading outflows this year with a $2.6 billion loss, followed by the $14.4 billion Vanguard Short-Term Inflation-Protected Securities ETF (VTIP)’s $2 billion loss. SCHP has fallen about 2.4% on a total return basis over the past year, compared to a 1.5% drop for the $29 billion iShares 7-10 Year Treasury Bond ETF (IEF), which holds similarly dated debt.
