TIPS Funds
TIPS (Treasury Inflation Protected Securities) are becoming an increasingly critical investment vehicle due to the fact that potential inflation still exists. Major institutions over the last decade have developed many mutual funds to satisfy the investment needs. So there are several choices for investors to choose from.
TIPS have many names: inflation protected securities, inflation adjusted securities, and inflation indexed securities. Basically, the interest rate of TIPS is determined by two components: inflation rate and margin rate. For example, if inflation rate is 3% and the margin rate is 2%, then the TIPS yield is 5%. Usually, the margin rate is fixed while the inflation rate is changing over the life of the bond.
Although the fund comprises securities guaranteed by the U.S. Government for the prompt payment of principal and interest at maturity, the fund itself is not guaranteed by the U.S. Government.
The following TIPS funds (ETF, closed-end & open-end mutual funds) are the investment universe I can find from various sources for now. They are listed here according to their inception dates.
BBH Real Return N (BBHIX)
Inception Date: 7/23/1992
Total Net Assets: $388.87 Mil
This is a no-load mutual fund. The investment seeks current income consistent with minimal price fluctuations in net asset value and maintenance of liquidity. The fund normally invests at least 80% of its net assets plus borrowings for investment purposes in securities that are structured to provide protection against inflation. Such securities are commonly referred to as Inflation-Indexed Securities.
American Century Inflation-Adjusted Bond Fund Investor Class (ACITX)
Inception Date: 10/2/1997
Total Net Assets: $649,405,339
This is a no-load mutual fund. The fund seeks to provide total return and inflation protection consistent with investment in inflation-indexed securities.
The fund invests at least 80% of its assets in inflation-adjusted debt securities. These securities include inflation-indexed securities issued by the U.S. Treasury, by other U.S. government agencies and instrumentalities, and by other, non-U.S. government entities such as corporations. Inflation-indexed securities are designed to protect the future purchasing power of the money invested in them; their principal value may be indexed for changes in inflation.
The fund may invest up to 20% of its assets in traditional U.S. Treasury, U.S. government agency or other non-U.S. government securities that are not inflation-indexed.
The fund also may invest in derivative instruments such as options, futures contracts, options on futures contracts, and swap agreements (including, but not limited to, credit default swap agreements), or in mortgage- or asset-backed securities, provided that such investments are in keeping with the fund’s investment objective.
The fund may purchase securities in a number of different ways to seek higher rates of return. For example, by using when-issued and forward commitment transactions, the fund may purchase securities in advance to generate additional income.
Vanguard Inflation-Protected Securities (VIPSX)
Inception Date: 6/29/2000
Total Net Assets: $6,332.30 Million
This is a no-load mutual fund. The investment seeks to provide inflation protection and income consistent with investment in inflation-indexed securities. The fund invests at least 80% of assets in inflation-indexed bonds issued by the U.S. government. It may invest in bonds of any maturity, though the fund typically maintains a dollar-weighted average maturity of seven to 20 years. The fund currently offers no load, Institutional, and Admiral Shares, all of which differ in fee structure and availability.
Fidelity Inflation-Protected Bond Fund (FINPX)
Inception Date: 6/26/2002
Total Net Assets: $1,436.34 Million
This is a no-load mutual fund. Normally invests at least 80% of assets in inflation-protected debt securities of all types. Currently focusing investments in inflation-protected debt securities issued by the U.S. Treasury, but may also invest in inflation-protected debt securities issued by U.S. Government agencies and instrumentalities other than the U.S. Treasury, and by other entities such as corporations and foreign governments.
Western Asset/Claymore US Treasury Inflation Protection Securities (WIA)
Inception Date: 9/26/2003
Total Net Assets: $393,708,000
Total Common Assets: $205,000,000
This is a closed-end fund. Its investment objective is to provide current income and capital appreciation. Under normal market conditions, the Fund will invest at least 80% of its total managed assets in U.S. Treasury Inflation Protected Securities (US TIPS). U.S. TIPS are fixed income securities issued by the U.S. Department of the Treasury, the principal amounts of which are adjusted daily based upon changes in the rate of inflation (currently represented by the non-seasonally adjusted Consumer Price Index for All Urban Consumers). The Fund may also invest up to 20% of its total managed assets in corporate bonds or other securities and instruments. The Fund intends to limit its investments to U.S. dollar-denominated securities and instruments, and will not invest in bonds that are below investment grade quality at the time of purchase.
iShares Lehman TIPS Bond Fund (TIP)
Inception Date: 12/4/2003
Total Net Assets: $4.22 Billion
This is an ETF. The investment seeks results that correspond generally to the price and yield performance of the inflation-protected sector of the United States Treasury market as defined by the Lehman Brothers U.S. TIPS index. The fund will normally invest at least 95% of assets in U.S. government bonds. It may also invest in bonds not included in the underlying index, cash, liquid short-term instruments, shares of money market funds, and securities not included in the index.
Western Asset/Claymore US Treasury Inflation Protection Securities 2 (WIW)
Inception Date: 2/27/2004
Total Net Assets: $1,252,595,000
Total Common Assets: $823,471,000
This is a closed-end fund. The Fund's primary investment objective is to provide current income. Capital appreciation, when consistent with current income, is a secondary investment objective. Under normal market conditions, the Fund will invest at least 80% of its total managed assets in U.S. Treasury Inflation Protected Securities.
Salomon Brothers Inflation Management Fund (IMF)
Inception Date: 5/26/2004
Total Net Assets: $262,007,000
Total Common Assets: $170,071,000
This is a closed-end fund. The Fund's primary investment objective is total return. The Fund's secondary investment objective is current income. Under normal market conditions, the Fund will invest at least 80% of its Managed Assets in inflation-protected securities issued by U.S. and non-U.S. governments, their agencies or instrumentalities and corporations that are structured to provide protection against inflation, and certain other fixed income securities that the Investment Manager believes will provide protection against inflation.
Fidelity Strategic Real Return Fund (FSRRX)
Inception Date: 9/7/2005
Total Net Assets: $2.53B
This is a no-load mutual fund. The investment seeks real return consistent with investment risk. The fund intends to use a neutral mix of approximately 30% inflation-protected debt securities, 25% floating-rate loans, 25% commodity-linked notes and related investments, and 20% REITS and other real estate related investments to achieve real return.
TIPS have many names: inflation protected securities, inflation adjusted securities, and inflation indexed securities. Basically, the interest rate of TIPS is determined by two components: inflation rate and margin rate. For example, if inflation rate is 3% and the margin rate is 2%, then the TIPS yield is 5%. Usually, the margin rate is fixed while the inflation rate is changing over the life of the bond.
Although the fund comprises securities guaranteed by the U.S. Government for the prompt payment of principal and interest at maturity, the fund itself is not guaranteed by the U.S. Government.
The following TIPS funds (ETF, closed-end & open-end mutual funds) are the investment universe I can find from various sources for now. They are listed here according to their inception dates.
BBH Real Return N (BBHIX)
Inception Date: 7/23/1992
Total Net Assets: $388.87 Mil
This is a no-load mutual fund. The investment seeks current income consistent with minimal price fluctuations in net asset value and maintenance of liquidity. The fund normally invests at least 80% of its net assets plus borrowings for investment purposes in securities that are structured to provide protection against inflation. Such securities are commonly referred to as Inflation-Indexed Securities.
American Century Inflation-Adjusted Bond Fund Investor Class (ACITX)
Inception Date: 10/2/1997
Total Net Assets: $649,405,339
This is a no-load mutual fund. The fund seeks to provide total return and inflation protection consistent with investment in inflation-indexed securities.
The fund invests at least 80% of its assets in inflation-adjusted debt securities. These securities include inflation-indexed securities issued by the U.S. Treasury, by other U.S. government agencies and instrumentalities, and by other, non-U.S. government entities such as corporations. Inflation-indexed securities are designed to protect the future purchasing power of the money invested in them; their principal value may be indexed for changes in inflation.
The fund may invest up to 20% of its assets in traditional U.S. Treasury, U.S. government agency or other non-U.S. government securities that are not inflation-indexed.
The fund also may invest in derivative instruments such as options, futures contracts, options on futures contracts, and swap agreements (including, but not limited to, credit default swap agreements), or in mortgage- or asset-backed securities, provided that such investments are in keeping with the fund’s investment objective.
The fund may purchase securities in a number of different ways to seek higher rates of return. For example, by using when-issued and forward commitment transactions, the fund may purchase securities in advance to generate additional income.
Vanguard Inflation-Protected Securities (VIPSX)
Inception Date: 6/29/2000
Total Net Assets: $6,332.30 Million
This is a no-load mutual fund. The investment seeks to provide inflation protection and income consistent with investment in inflation-indexed securities. The fund invests at least 80% of assets in inflation-indexed bonds issued by the U.S. government. It may invest in bonds of any maturity, though the fund typically maintains a dollar-weighted average maturity of seven to 20 years. The fund currently offers no load, Institutional, and Admiral Shares, all of which differ in fee structure and availability.
Fidelity Inflation-Protected Bond Fund (FINPX)
Inception Date: 6/26/2002
Total Net Assets: $1,436.34 Million
This is a no-load mutual fund. Normally invests at least 80% of assets in inflation-protected debt securities of all types. Currently focusing investments in inflation-protected debt securities issued by the U.S. Treasury, but may also invest in inflation-protected debt securities issued by U.S. Government agencies and instrumentalities other than the U.S. Treasury, and by other entities such as corporations and foreign governments.
Western Asset/Claymore US Treasury Inflation Protection Securities (WIA)
Inception Date: 9/26/2003
Total Net Assets: $393,708,000
Total Common Assets: $205,000,000
This is a closed-end fund. Its investment objective is to provide current income and capital appreciation. Under normal market conditions, the Fund will invest at least 80% of its total managed assets in U.S. Treasury Inflation Protected Securities (US TIPS). U.S. TIPS are fixed income securities issued by the U.S. Department of the Treasury, the principal amounts of which are adjusted daily based upon changes in the rate of inflation (currently represented by the non-seasonally adjusted Consumer Price Index for All Urban Consumers). The Fund may also invest up to 20% of its total managed assets in corporate bonds or other securities and instruments. The Fund intends to limit its investments to U.S. dollar-denominated securities and instruments, and will not invest in bonds that are below investment grade quality at the time of purchase.
iShares Lehman TIPS Bond Fund (TIP)
Inception Date: 12/4/2003
Total Net Assets: $4.22 Billion
This is an ETF. The investment seeks results that correspond generally to the price and yield performance of the inflation-protected sector of the United States Treasury market as defined by the Lehman Brothers U.S. TIPS index. The fund will normally invest at least 95% of assets in U.S. government bonds. It may also invest in bonds not included in the underlying index, cash, liquid short-term instruments, shares of money market funds, and securities not included in the index.
Western Asset/Claymore US Treasury Inflation Protection Securities 2 (WIW)
Inception Date: 2/27/2004
Total Net Assets: $1,252,595,000
Total Common Assets: $823,471,000
This is a closed-end fund. The Fund's primary investment objective is to provide current income. Capital appreciation, when consistent with current income, is a secondary investment objective. Under normal market conditions, the Fund will invest at least 80% of its total managed assets in U.S. Treasury Inflation Protected Securities.
Salomon Brothers Inflation Management Fund (IMF)
Inception Date: 5/26/2004
Total Net Assets: $262,007,000
Total Common Assets: $170,071,000
This is a closed-end fund. The Fund's primary investment objective is total return. The Fund's secondary investment objective is current income. Under normal market conditions, the Fund will invest at least 80% of its Managed Assets in inflation-protected securities issued by U.S. and non-U.S. governments, their agencies or instrumentalities and corporations that are structured to provide protection against inflation, and certain other fixed income securities that the Investment Manager believes will provide protection against inflation.
Fidelity Strategic Real Return Fund (FSRRX)
Inception Date: 9/7/2005
Total Net Assets: $2.53B
This is a no-load mutual fund. The investment seeks real return consistent with investment risk. The fund intends to use a neutral mix of approximately 30% inflation-protected debt securities, 25% floating-rate loans, 25% commodity-linked notes and related investments, and 20% REITS and other real estate related investments to achieve real return.
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