Although Horizon Kinetics Inflation Beneficiaries ETF INFL has posted better-than-average returns since its 2021 inception, it’s tough to see how its replicable, thematic structure adds long-term value. 

The strategy is built on a sensible framework that seeks low-debt, capital-light companies that can pass rising costs onto customers more easily than others. This typically results in large allocations to the energy, materials, and financials sectors, which together accounted for 80% of assets as of July 2023. Decent fundamental research underpins this strategy, but modest risk controls, such as an appetite for relatively illiquid stocks, exacerbate the risks of this narrowly focused portfolio. Its heavy concentration in commodity- and interest-rate-sensitive businesses, such as royalty and oil-pipeline companies, could make it more vulnerable to synchronized price swings. 

Manager James Davolos shows promise but lacks substantial experience leading a strategy. He joined Horizon Kinetics in 2005 and his background covering energy and financials stocks aligns well with this portfolio's composition. He is a listed manager on five other mandates, but his track record on those mandates is difficult to assess because of a massive single stock bet on Texas Pacific Land TPL in most of those other portfolios, as well as his role as a supporting actor to the firm's founders. Still, Davolos has shown some prudence in managing this strategy. For example, he cut the strategy’s stake in Texas Pacific Land by 30% in late 2022, keeping its weighting around 7% of assets.  

Davolos has an adequate supporting cast of five analysts who average more than 20 years of experience. While Davolos is the final decision-maker, he also consults with firm founders Murray Stahl, Peter Doyle, and Steven Bregman to validate investment ideas.

Although the fund has trounced broad-market indexes since its inception, there is scant evidence of stock-picking skill or repeatability of its outperformance. Its results are primarily explained by its sector exposures--natural byproducts of the inflation-fighting theme that are attainable through passively managed sector funds. And although there is no perfect benchmark for this strategy, the cheaper, passively managed Fidelity Stocks for Inflation ETF FCPI has notched the same 12% annualized return as this strategy since January 2021. As such, this strategy struggles to make a case for itself.

Analyst Rating

Proceed with caution.

Analyst

Andrew Redden

SPDR Wells Fargo Preferred Stock ETF

Viper Energy Partners LP

Wheaton Precious Metals

Texas Pacific Land Trust

Intercontinental Exchange

Franco-Nevada C

Marsh & McLennan

CACI

Archer-Daniels-Midland Company

Bunge

Large industry concentrations coupled with modest risk controls warrant a Below Average Process rating. 

Manager James Davolos and his team seek low-debt, capital-light companies that can take advantage of rising prices or volumes with little impact to their underlying costs. The team sifts through developed-markets stocks to find companies that can benefit either directly or indirectly from inflation. Its watchlist often favors niches of the market such as royalty and oil-pipeline companies, transaction facilitators, and data providers. From there, Davolos and his team conduct stock-level fundamental research to construct the portfolio.  

The portfolio emphasizes companies whose fates tend to be tied together. That's because the team's approach leads to large bets on stocks that are often sensitive to factors such as commodity prices and interest rates, which are not necessarily accounted for when looking at a stock in isolation. While Davolos monitors these exposures, they rarely influence portfolio moves and are inherent in the portfolio's objective. Managing these risks during unfavorable or shifting market conditions could be challenging and the strategy has not yet been tested in a prolonged disinflationary or deflationary environment. Davolos says that the portfolio's composition in a period like that will depend on many factors, but he is likely to favor more indirect beneficiaries of inflation, such as financial exchanges or pharmaceutical companies.

Below Average

Process

Manager James Davolos and his team of analysts are experienced and well-credentialed. But Davolos has yet to prove himself as a lead manager. The strategy receives an Average People rating. 

Davolos is a listed manager on five of Horizon Kinetics’ other strategies with different mandates, but his contributions to them are difficult to assess because of their massive bets on a single stock and his role as a supporting actor to the firm's founders. He joined Horizon Kinetics in 2005. His background covering energy and financials stocks is well aligned with this strategy, which had more than 50% of its assets in those sectors as of July 2023. Davolos has kept this portfolio in check; while its inflation-fighting nature comes with inherent risks and concentrations, he has some guardrails such as capping individual position sizes at 7.5% of assets. Comanagers Peter Doyle and Steven Bregman, who helped co-found the firm in 1994, provide support, but Davolos bears ultimate responsibility for portfolio decisions. 

Horizon Kinetics’ large team of generalist analysts offers additional help. Among that group, Davolos typically relies on five analysts who average 20 years of experience. Their workload is not much of an issue, as the team’s relatively narrow focus greatly reduces the investable universe of global developed-markets stocks. Currently, Davolos monitors around 115 names--a manageable number given his resources.

Average

People

Horizon Kinetics Asset Management is an independent investment boutique with insufficient risk controls, an issue that is exacerbated by the firm’s lineup of thematic, highly concentrated portfolios. It warrants a Low Parent rating.

Co-founders Murray Stahl, Peter Doyle, and Steven Bregman jointly run the firm, but a massive firmwide position in a single stock overwhelms positives that come from the research team. Nearly a third, or $2.2 billion, of the firm’s $6.8 billion of assets under management as of June 2022 rested in a single stock: Texas Pacific Land TPL, a $13-billion-dollar real estate trust that owns vast tracts in Texas and earns royalties off grazing and oil leases. The stock accounts for more than 50% of assets in some strategies, which raises obvious risk-management and liquidity concerns should the stock sell off or the firm experience significant outflows. Additionally, there are conflicts of interest with firm CEO/CIO Stahl, as he is compensated by Texas Pacific Land for his seat on the board and is personally invested in the company. 

High fees across the fund lineup, a smattering of questionably timed fund launches, and the overhaul and renaming of strategies raise additional concerns. The firm saw multiple strategy closures during the dot-com bubble, and it has a history of launching products that seemingly chase fads and short-term asset flows.

Parent

Horizon Kinetics Inflation Beneficiaries ETF

INFL is an actively-managed fund seeking long-term capital growth in inflation-adjusted terms from companies expected to benefit, directly or indirectly, from inflation.

Fidelity Stocks for Inflation ETF

Quadratic Interest Rate Volatility and Inflation ETF

Amplify Inflation Fighter ETF

AXS Astoria Inflation Sensitive ETF

During a recent appearance at the Economic Club of New York, JPMorgan Chase JPM CEO Jamie Dimon expressed concerns that the U.S. economy could witness challenges similar to those of the 1970s. He indicated the likely resurgence of stagflation — a condition characterized by low growth combined with high inflation — which could complicate inflationary risks currently being faced by the U.S. economy, as quoted on a Yahoo Finance article.

Is 1970s Stagflation Knocking at the Door? ETFs to Play

DB Gold Double Short ETN

SPDR Gold Trust

ProShares UltraShort Gold

iShares U.S. Oil Equipment & Services ETF

Vanguard Mega Cap Value ETF

OShares U.S. Quality Dividend ETF

Simplify Interest Rate Hedge ETF

VanEck Inflation Allocation ETF

Global X Interest Rate Hedge ETF

FolioBeyond Rising Rates ETF

SPDR Portfolio S&P 500 Value ETF

MicroSectors Gold Miners 3X Inverse Leveraged ETN

Siren DIVCON Leaders Dividend ETF

U.S. inflation jumped in March, surpassing expectations primarily due to higher petrol and shelter costs, dashing hopes of a June interest rate cut by the Fed.

ETF Strategies to Play Hot inflation Data

Horizon Kinetics Inflation Beneficiaries ETF (INFL) is an actively managed ETF that aims to provide long-term growth adjusted for inflation. INFL's portfolio includes a blend of traditional U.S. stocks, royalty trusts, MLPs, and stocks of commodity exchanges. The fund focuses on sectors like energy, materials, and financials, investing in companies with hard assets and pricing power to benefit from inflation.

INFL: For Re-Accelerating Inflation

Horizon Kinetics Inflation Beneficiaries ETF (INFL) aims to profit from sectors, industries, and companies that perform well during periods of above-average inflation. INFL primarily invests in commodity-related companies, with a supplementary allocation to consumer and financial sectors. The current market perception is that inflation has peaked, making INFL a hold rather than a buy.

INFL: ETF To Consider When Inflation Spikes Again

Merk Stagflation ETF

The U.S. economy has been experiencing sticky inflation, higher rates and slower growth, meaning a stagflationary scenario.

ETFs to Play Amid Stagflation

Horizon Kinetics Inflation Beneficiaries ETF seeks long-term growth of capital in real terms and has outperformed the S&P 500 since its launch. INFL charges a high management fee of 0.85%, compared to the average equity ETF expense ratio of 0.16%. Investors can consider building their own inflation beneficiaries portfolio using ETFs and blue chip stocks to avoid the high management fee and potentially achieve better results.

INFL: Consider A Lower Cost Approach To Bet On Inflation

With U.S. inflation appearing stubborn, this inflation-centric ETFs may come to investors' rescue.

6 ETFs to Play Persistent Inflation

An improving U.S. economy can push up inflation, going into 2024.

6 ETFs to Play "Upside Risks" to Inflation

Alexandria Real Estate Equities

Diamondback Energy

Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF

United States 12 Month Oil Fund LP

Vanguard Real Estate ETF

Vanguard Short-Term Inflation-Protected Securities ETF

These stocks and ETFs are some of the best inflation-proof investments and could continue to shine as price growth cools.

The 9 Best Inflation-Proof Investments for Your Portfolio

Alerian MLP ETF

SPDR Bloomberg 1-3 Month T-Bill ETF

iShares Core MSCI EAFE ETF

Harbor International Compounders ETF

Invesco S&P 500 Equal Weight ETF

SPDR Portfolio High Yield Bond ETF

Vanguard FTSE Developed Markets ETF

Vanguard Short-Term Treasury ETF

Vanguard Tax-Exempt Bond Index ETF

VettaFi's head of research Todd Rosenbluth discussed fixed income and international equity on this bonus “ETF of the Week” podcast with Chuck Jaffe of “Money Life.

ETF of the Week BONUS: Todd Rosenbluth on Fixed Income and International Equity ETFs

INFL posted a total return of over 2% in 2022, something few equity ETFs accomplished. Inflation is not likely going away anytime soon, even if it moderates further. That makes a diversified, inflation-fighting equity ETF like INFL one to follow.

INFL: This Rare Positive Performer In 2022 Is Still Hanging In

NEW YORK, NY / ACCESSWIRE / February 23, 2023 / The Horizon Kinetics Inflation Beneficiaries ETF (NYSE:INFL) published the 2022 annual letter, which is available here . The replay to the annual portfolio webinar hosted on February 15th, 2023 with James Davolos, co-portfolio manager of INFL, is now available: Video Replay Webinar Slides In his letter, Mr.

The Horizon Kinetics Inflation Beneficiaries ETF (NYSE:INFL) Published the 2022 Annual Letter and Portfolio Webinar Replay

NEW YORK, NY / ACCESSWIRE / February 7, 2023 / The Horizon Kinetics Inflation Beneficiaries ETF (NYSE:INFL) announced today that a public portfolio manager webinar will be held at 11am Eastern Time, on February 15th, 2023. INFL celebrated its second anniversary on January 11, 2023.

The Horizon Kinetics Inflation Beneficiaries ETF (INFL) Announces Upcoming Investor Call

INFL invests in stocks with significant exposure to inflation, and which have outperformed as inflation skyrockets. Should investors be concerned about INFL as inflation moderates?

Should You Sell INFL As Inflation Slows Down?

We expect inflation will not return quickly to the 2% Fed-target. The Horizon Kinetics Inflation Beneficiaries ETF focuses on stocks that thrive when inflation is high.

INFL: Will Likely Continue To Benefit From High Inflation

Horizon Kinetics Blockchain Development ETF

With hundreds of new ETFs seemingly launched every year, it isn't getting any easier to stand out from the crowd. That said, 2022 saw an inflation-focused ETF launched just last year from RIA shop Horizon Kinetics outperform ETFs from some notable players like First Trust and Invesco.

RIA's Inflation-Focused Debut ETF Stands Out in Hectic 2022

Doubleline Shiller Cape US Equities ETF

Capital Group Dividend Value ETF

Manager Directed Portfolios - iM DBi Managed Futures Strategy ETF

iShares Core S&P 500 ETF

Matthews Asia Innovators Active ETF

iShares 1-3 Year Treasury Bond ETF

Vanguard Total Stock Market ETF

AB Ultra Short Income ETF

There is a lot to be thankful for in the ETF industry in 2022 despite global equity and bond markets remaining under pressure from high inflation and the aggressive actions of central banks that could result in prolonged economic weakness.   U.S.-listed ETFs Already Gathered More Than $500 Billion in Assets.

Thankful Times in the ETF Industry

Inflation is high and rising. INFL invests in companies which tend to outperform under said conditions.

INFL: Strong Inflation Hedge ETF, Proven Investment Strategy

Invesco DB Commodity Index Tracking Fund

iShares MSCI Global Metals & Mining Producers ETF

Invesco Dynamic Energy Exploration & Production ETF

SPDR SSgA Multi-Asset Real Return ETF

United States Natural Gas Fund LP

United States Oil Fund LP

Energy Select Sector SPDR Fund

Good, but not as well as hoped. Inflation-hedge ETFs have generally been successful in minimizing losses during the current inflationary environment, less so at generating positive returns.

How Have Inflation-Hedge ETFs Fared This Year?

iShares MSCI ACWI ETF

Indexiq ETF Tr Shs IQ Hedge Macro Tracker

Alpha Architect Value Momentum Trend ETF

These global fared better than the broader market indexes in the first nine months of 2022.

5 Winning Global ETFs of First Nine Months of 2022

This INFL ETF does well during inflation. Inflation appears to have peaked so INFL might decline in short term.

INFL: Have We Reached Peak Inflation

Persistently soaring inflation has been the hottest issue in the stock market that has made investors jittery. Investors could well be served with investments designed to counteract inflation.

5 ETFs to Ride High Amid Red-Hot Inflation

WisdomTree Continuous Commodity Index Fund

iShares Gold Trust

Schwab U.S. REIT ETF

Schwab US TIPS ETF

iShares TIPS Bond ETF

Investors should focus on these specific ETF areas that are considered good investment options amid persistently high-inflation levels.

ETF Strategies to Navigate 40-Year High U.S. Inflation Levels

INFL has delivered a positive return this year with exposure to companies that can benefit from inflation. The actively managed strategy features a unique approach that includes exposure to various industries beyond energy and materials.

INFL: Too Much Of A Good Thing Is The Risk Going Forward

The Horizon Kinetics Inflation Beneficiaries ETF (INFL) is an actively managed fund that selects its holdings at the global level.

News for Horizon Kinetics Inflation Beneficiaries ETF ETF (INFL)