Goldman Sachs Asset Management (GSAM), the asset management and exchange-traded funds (ETFs) arm of The Goldman Sachs Group, Inc. (GS), added to its lineup of fixed income offerings with a new fund designed to offer inflation protection. The Goldman Sachs Access Inflation Protected USD Bond ETF (GTIP) is a smart beta spin on the bonds known as Treasury Inflation Protection Securities (TIPS).
"Coupons and principal rates of TIPS securities, however, change based on the consumer price index (CPI), which provides statistics that give insight into the potential direction of inflation," according to Investopedia. GTIP follows the FTSE Goldman Sachs Treasury Inflation Protected USD Bond Index. The new ETF, which has 10 holdings, includes only TIPS that have a minimum of one year to maturity and a minimum issue size of $5 billion. (See also: Tips for Inflation-Adjusted Bond (TIPS) ETFs.)
"In an inflationary economic environment, GTIP provides investors with a potential hedge through its innovative screening approach to TIPS bonds," Michael Crinieri, GSAM's global head of ETF strategy, said in a statement. "The addition of GTIP further highlights the mission of our Access ETF lineup, providing investors with lower-cost bond funds."
GTIP's underlying index "employs a simple, transparent process that provides exposure to treasury inflation-protected securities ('TIPS') that meet certain liquidity and seasoning criteria," according to GSAM. The effective duration on GTIP is 7.49 years, and the new fund's weighted average maturity is 7.91 years. Approximately two-thirds of GTIP's holdings have maturities of three to five years, five to seven years or seven to 10 years. (For more, see: Top 5 TIPS ETFs.)
"TIPS present an attractive diversification opportunity for many investors with relatively low correlations to other major asset classes," Jason Singer, portfolio manager for GTIP, said in the statement.
GTIP follows a model previously used by GSAM to establish ETF success: a low fee. GTIP's annual expense ratio is just 0.12%, the equivalent of $12 on a $10,000 investment. That is inexpensive relative to a broad swath of smart beta bond ETFs and highly competitive or cheaper than all but a small number of TIPS ETFs. GSAM has offered bond ETFs for two years, and GTIP is the fourth fund in that group. (For additional reading, check out: Goldman Launches Smart Beta ETFs at Discount Prices.)