Volatility and uncertainty in the market due to the ongoing conflict in Ukraine are benefiting inflation-based exchange-traded funds.
Most inflation ETFs consist of stocks that tend to benefit from inflation, such as mining, transportation and real estate companies.
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For the Horizon Kinetics Inflation Beneficiaries ETF (INFL), the focus is on being "asset-light," its portfolio manager James Davolos told CNBC's "ETF Edge" this week.
"A lot of these companies are going to have expenses that are as much or greater than they can grow revenue," said Davolos, also a research analyst at his firm. "It's really important to have a hard asset that can benefit from inflation driving your revenue."
"While your revenue grows with a lot of these companies, your margins are also going to expand," he said. "The companies benefit twofold."
INFL also holds shares of stock exchanges such as Deutsche Boerse, which accounts for more than 4% of the ETF's assets. Margins and revenues may go up across the global exchange complex with inflation, Davolos said.
INFL has over $1 billion in assets under management.
"These businesses are going to generate very strong economic returns under the pre-inflation status quo," Davolos said.
INFL is up more than 28% since its launch in January 2021.