Bridgewater Associates will launch a portfolio of Treasury Inflation-Protected Securities in the coming months for institutional investors, says Daniel Bernstein, director of research at $35 billion in assets Bridgewater. He says the time is right for TIPS because pension funds are focusing more on protecting assets as the equity markets continue to slide. "In the $150 billion TIPS market, treasuries are growing at about $20-25 billion a year, which means that there is a lot of growth in that asset class," said Bernstein.
Bernstein said TIPS are attractive to institutional investors, who are becoming more sensitive to macro-economic factors such as inflation as the equity market continue its slide. Additionally, he noted that there is nothing in a traditional pension plan that protects against inflation because fixed-income and equity will both perform poorly when inflation rises.
Bernstein added that although the CPI-U rose only 0.1% in July, the month-to-month movements of the index has little affect on the long-term price of TIPS. The firm hopes to garner about $500 million for the new fund in its first year, and already has received interest from several funds, which Bernstein declined to name.