With inflation continuing to rise in recent months, Deutsche Bundesbank is now expecting up to four per cent inflation at the end of 2021, while the European Central Bank recently adjusted its forecast of 1.4 per cent upwards. Although states, like central banks, assuage fears, declaring inflation to be a temporary phenomenon, investors apparently disagree.
“Inflows into ETF portfolios have risen pretty significantly in the past three months”, Gerlinger pointed out. “According to advisors’ unanimous opinion, this is due to the relatively high proportion of gold.” Some ten per cent of the portfolio volume is invested in gold funds. Gerlinger: “We are using a particularly low-cost share class of funds to keep costs really low throughout the portfolio.”
Hedging against rising prices is a major goal for investors since they view rising inflation as one of the biggest threats from a risk perspective. “While highly indebted states in particular need inflation to get out of debt, purchasing power is dwindling”, said Gerlinger. The question is how sustainable price increases are: In recent months, base effects or one-off effects were referenced, such as when the VAT reduction in Germany expired or the CO2 tax was introduced. Global crises put pressure on oil prices, and supply chains, still not fully restored, are also causing higher prices.
“While many of these reasons do have a one-off effect, others are more permanent”, cautioned Gerlinger. Battling the consequences of the pandemic, for example, just like the fight against climate change, costs a lot of money, which will be provided by the central banks. “The amount of money that is flowing into the market is enormous and will continue to burden states for years to come”, said Gerlinger.
In this environment, bonds are no longer very attractive for investors. “Shares are always a good alternative, but some investors consider them too risky”, Gerlinger highlighted. For this reason, investments in tangible assets are in demand, but also classic safe havens such as gold and other precious metals. “Obtaining this in a managed ETF portfolio with lower costs and not having to incorporate it individually is obviously very attractive to investors – and also hard to find elsewhere”, Gerlinger explained. “I expect we will continue to see high inflows for a long time.”
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