Hedging inflation - Quadratic Capital's Nancy Davis joins Alpha Trader
Jul 07, 2021•39 min
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Episode description
This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Nancy Davis, founder and CIO of Quadratic Capital, and manager of the Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL).
Among the topics discussed:
No one can be certain of the inflation outlook - be it the Fed’s “transitory,” or somewhat more persistent than that, or of the runaway type
No matter the outlook, we’re all naturally “short” inflation, so should look to have at least some exposure to higher inflation in our portfolios
The IVOL holds about 85% of assets in inflation-protected Treasurys (TIP), and uses the remainder of assets to go long fixed-income volatility
The benchmark Bloomberg Barclays Aggregate Bond Index (ETF version: [[AGG]]) has no inflation protection among its holdings, and - through its high allocation to MBS - is actually short volatility
The recent rally in Treasurys - which has sent the 10-year yield down to 1.36% - doesn’t make a whole lot of sense given strong economic growth and perky inflation. Is a slowdown on the way, or are investors too aggressive in pricing in rate hikes, or have central bank asset purchases erased the idea of price discovery?
Why gold is overrated as an inflation hedge
Links:
The Quadratic Interest Rate Volatility and Inflation Hedge ETF
Listen to or subscribe to Alpha Trader on these podcast platforms:
Apple Podcasts
Spotify
Google Play
Stitcher
Learn more about your ad choices. Visit megaphone.fm/adchoices
Among the topics discussed:
No one can be certain of the inflation outlook - be it the Fed’s “transitory,” or somewhat more persistent than that, or of the runaway type
No matter the outlook, we’re all naturally “short” inflation, so should look to have at least some exposure to higher inflation in our portfolios
The IVOL holds about 85% of assets in inflation-protected Treasurys (TIP), and uses the remainder of assets to go long fixed-income volatility
The benchmark Bloomberg Barclays Aggregate Bond Index (ETF version: [[AGG]]) has no inflation protection among its holdings, and - through its high allocation to MBS - is actually short volatility
The recent rally in Treasurys - which has sent the 10-year yield down to 1.36% - doesn’t make a whole lot of sense given strong economic growth and perky inflation. Is a slowdown on the way, or are investors too aggressive in pricing in rate hikes, or have central bank asset purchases erased the idea of price discovery?
Why gold is overrated as an inflation hedge
Links:
The Quadratic Interest Rate Volatility and Inflation Hedge ETF
Listen to or subscribe to Alpha Trader on these podcast platforms:
Apple Podcasts
Spotify
Google Play
Stitcher
Learn more about your ad choices. Visit megaphone.fm/adchoices
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