While hard economic data has yet to support inflation fears, many investors are looking to get behind the eight ball. Investors have shown a growing interest in Treasury Inflation-Protected Securities (TIPS) and vehicles that provide exposure to them.
"At PIMCO, we agree with this shift in strategic focus," the company noted in a recent release about the use of TIPS. "At our 2009 Secular Forum, in which we developed our longer-term three- to five-year outlook, one of our conclusions was that the domestic economy will likely have to deal with heightened inflation expectations, with the longer-term balance of inflation risk biased to the upside."
America is aging and baby boomers are becoming increasingly concerned about getting by on a fixed income. These investors are especially concerned about the effects of inflation on their portfolios. Whether inflation fears take shape or not, PIMCO wants to be ready. It has identified the hunger for TIPs ETFs and wants part of the action.STPZ joins the lineup beside an already-popular competitor. TIP has been one of the biggest success stories for iShares in 2009. TIP and the iBoxx $ Investment Grade Corporate Bond Fund (LQD) have been the biggest asset gatherers for iShares so far this year. This isn't the first shot that PIMCO's fired across iShares' bow. PIMCO's initial fixed-income product, the 1-3 Year U.S. Treasury Index Fund (TUZ), is squarely aimed at iShares Barclays 1-3 Year Treasury Bond (SHY). Rather than reinventing the wheel, Pimco decided to make a cheaper one. TUZ has an expense ratio of 0.09% while SHY has expenses of 0.15%, according to Morningstar (MORN).