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The VanEck Vectors
® Real Asset Allocation ETF (“RAAX”) returned +2.29% versus -2.15% for the Bloomberg Commodity Index. March was another strong month for RAAX. The largest contributors to performance, from largest to smallest, were income assets with a return of +5.66%, financial assets with a return of +2.72% and resource assets, with a return of +0.48%.
President Joe Biden recently announced an ambitious $2.3 trillion spending plan to upgrade the nation’s bridges, roads, schools and more. This level of investment is going to require a lot of natural resources to complete. This combined with the unprecedented monetary support from the U.S. Federal Reserve (Fed) and the other aggressive fiscal support programs, is creating strong inflationary pressures. In our view, this leads to a very nice outlook for real assets and, more specifically, RAAX.
The VanEck Vectors
® Real Asset Allocation ETF (“RAAX”) returned +4.61% versus +6.47% for the Bloomberg Commodity Index. In general, most real assets continue to benefit from the expectation of higher inflation, while oil prices were lifted higher due to supply constraints that resulted from the deadly storm in Texas. On the other hand, income producing real assets were negatively impacted by the rapid surge in interest rates. Gold prices remain under pressure due to optimism about future growth and the subsequent rise in interest rates. And lastly, Bitcoin, which RAAX added exposure to for the first time last month, surged from $32,601 to an intra-month and all-time high of $57,355.
The VanEck Vectors
® Real Asset Allocation ETF (“RAAX”) and real assets broadly both finished the year on a positive note. RAAX returned +0.44% versus +4.97% for the Bloomberg Commodity Index and +4.82 for the Blended Real Asset Index. However, the total return for RAAX with the yearend distribution included was +6.53%, outperforming both indices during the month.[1]
The rally in real assets continued into December as investors continued to weigh the near-term risks of inflation. RAAX has been a huge beneficiary of this change in sentiment because of the ability of real assets to hedge against inflation. Regardless of where you stand on the “great inflation debate”, it seems unwise to ignore this risk and fail to position your portfolio accordingly.