NEPC’s Phillip Nelson was recently quoted in a Pensions & Investments article highlighting TIPS as a key tool for real rate exposure, notes that breakeven rates are currently high, and says clients are increasingly looking to TIPS for diversification and liquidity. View the full article on Pensions & Investments’ site here.
Amid heightened volatility and economic uncertainty, the market for exchange-traded funds holding Treasury inflation-protected securities has rekindled after three consecutive years of outflows.
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“From an allocator’s long-term perspective, TIPS is a favorite asset class for real rate exposure,” said Phillip Nelson, partner and head of asset allocation at investment consultant NEPC. “As a rough target, we look at TIPS holdings equal to the size of a Treasury allocation or relative to investment-grade exposure.”
Nelson has observed, however, that 5-year and 10-year breakeven rates are “currently a little rich.” Breakeven rates are the spread between nominal Treasuries and TIPS at constant maturities.
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“Over the last month and a half, we’ve received a lot more questions on TIPS given the uncertainty of the tariff regime,” said NEPC’s Nelson.
“Within our OCIO business, clients want to know if they have enough liquidity to meet cash flow needs. They are looking to get more diversified, add fixed income, and allocate slightly more to TIPS.”
Click here to read the full article on the Pensions & Investment site.