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Evaluating Inflation Hedges

More diverse than expected

Nicolas Rabener
10 min read
18 Jul 2022

SUMMARY

  • Despite being different metrics, CPI and breakeven inflation rates exhibited the same trends since 2003
  • The securities with high betas to inflation come from diverse sectors, not just from energy and commodities
  • Portfolios often feature hidden inflation exposure that should be revealed via factor exposure analysis

INTRODUCTION

The Bundesbank estimated that Germans hoarded about EUR 200 billion of cash at home and deposit boxes at banks as of 2020. Aside from the risk of losing money at home through theft, water damages, or fire, cash loses its value daily in real terms through inflation.

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