Inflation fears stoked by government spending and congressional Republicans' questioning of Fed policy have investors seeking inflation-adjusted returns, and this trend has some companies offering new or repackaged funds that offer a safe harbor from the rising interest rates that accompany inflation.
Two such inflation-fighting funds that have recently launched or been repackaged are:
- The Hartford Tax-Free National Fund (HTNAX), which will be renamed as The Hartford Municipal Real Return Fund effective March 1, 2011.
- The ING Floating Rate Fund (IFRAX), which launched last August and the company is now pushing investors to buy as interest rates look likely to rise.
On Wednesday, members of Congress sharply questioned Federal Reserve Chairman Ben Bernanke over whether the Fed's policies are raising the risk of rising inflation in the months ahead. The new House Budget Committee Chairman Paul Ryan, R-Wis., said he was concerned that the Fed won't be able to detect inflation until "the cow is out of the barn" and inflation is already spreading dangerously through the economy.
Bernanke said inflation in the United States remains "quite low," though he acknowledged that inflation is surging in emerging economies. But he downplayed the risks to the U.S. economy, even as lawmakers expressed concerns about rising prices for gasoline and food.
The Hartford Municipal Real Return Fund, sub-advised by Hartford Investment Management, will continue to seek income exempt from federal income tax, but will now also seek real return, or after-tax inflation-adjusted returns.
The fund intends to invest in inflation-linked derivatives and securities to hedge the sensitivity of the municipal bond portfolio against changes in inflation and inflation expectations.
