If You Invested in Horizon Kinetics Inflation Beneficiaries ETF (INFL)

The Horizon Kinetics Inflation Beneficiaries ETF (NYSE: INFL) is an actively managed exchange traded fund sponsored by Horizon Kinetics Asset Management LLC. According to Horizon Kinetics, the fund was launched in January 2021 and is designed to address what the firm views as a key risk for investors: inflation. INFL seeks exposure to businesses that Horizon Kinetics believes can benefit from, or are positively positioned for, an inflationary environment.

The ETF invests in equities linked to real assets, with an emphasis on what Horizon Kinetics describes as capital-light or asset-light companies whose economics are tied to inflationary underlying assets. The fund’s materials state that these businesses are intended to have the potential to generate attractive cash flows across different inflation, interest rate and growth regimes. INFL is described as a complementary, full-cycle real asset strategy that can offer diversification relative to conventional index exposures.

INFL is managed using the same long-term, contrarian, fundamental value and research-driven philosophy that Horizon Kinetics has applied in its other products for decades. The portfolio management team relies on proprietary research developed over many years at Horizon Kinetics and its predecessor firms. The fund is non-diversified, meaning it may hold a more concentrated set of positions than a diversified fund, and it is actively managed, so results can be affected by the adviser’s security selections.

The fund’s disclosures highlight that its investments in securities linked to real assets involve significant financial, operating and competitive risks, and that such securities can be sensitive to macroeconomic conditions, including changes in interest rates or economic downturns in the regions where the underlying assets are located. INFL may invest in foreign securities, including those in emerging markets, and in smaller and mid‑capitalization companies, which its risk disclosures note can involve greater volatility and additional political, economic, currency and accounting risks.

Horizon Kinetics notes that INFL is intended to provide exposure to what it calls “inflation beneficiaries” that are not heavily represented in major equity indexes. The firm has stated that the portfolio is designed so that its performance is not solely dependent on ever-rising inflation, but instead aims to compound returns through a variety of business cycles while maintaining exposure to structural inflationary themes. The fund is distributed by Foreside Fund Services, LLC.

Fund objectives and approach

According to launch and subsequent communications, the investment objective of INFL is to seek opportunities in companies that Horizon Kinetics believes can thrive in an inflationary environment. The manager emphasizes businesses that have exposure to inflationary underlying assets but do not require high levels of capital intensity. The stated intent is to combine real-asset sensitivity with business models that can endure periods of lower inflation while still compounding asset value and economic returns.

Horizon Kinetics has described the strategy as based on decades of proprietary research and as an extension of its long-term, fundamental value philosophy. The firm has also characterized INFL as offering diversification benefits relative to broad market indexes, which it views as having become concentrated over time. As an actively managed ETF, INFL does not track a published index; instead, its holdings and positioning are determined by the portfolio management team.

Risk considerations

The fund’s disclosures emphasize that investing involves risk, including the possible loss of principal. Shares of the ETF are bought and sold on an exchange at market prices, which may differ from net asset value (NAV), and are not individually redeemed from the fund. Brokerage commissions can reduce investor returns.

Key risks highlighted in the fund’s communications include:

• Risks associated with securities linked to real assets, including financial, operating and competitive risks.
• Exposure to adverse macroeconomic conditions, such as rising interest rates or economic downturns in the markets where the underlying assets are located.
• Risks of investing in smaller and mid‑capitalization companies, which may be more volatile than larger, more established issuers.
• Risks of investing in foreign securities, including emerging markets, which can involve greater volatility and political, economic, currency and accounting differences.
• Risks associated with active management, as the fund’s performance may be affected by the adviser’s security selection and portfolio decisions.
• Concentration risk related to the fund’s non‑diversified status, which can increase exposure to individual holdings.

Horizon Kinetics and the fund’s distributor repeatedly remind investors to review the statutory prospectus and summary prospectus for detailed information on objectives, risks, charges and expenses, and to read these documents carefully before investing.

Sponsor and management background

INFL is managed by Horizon Kinetics Asset Management LLC, an SEC‑registered investment adviser and subsidiary of Horizon Kinetics LLC. Horizon Kinetics describes itself as an independently owned, research-driven investment boutique that follows a long-term, contrarian, fundamental value philosophy first developed by its founders at Bankers Trust Company decades ago. The firm has primary offices in New York City and White Plains, New York, and oversees other investment products in addition to INFL.

Communications about INFL frequently feature commentary from members of the portfolio management team, who discuss topics such as the investment landscape, inflation risks, asset prices, and the positioning of the fund. Horizon Kinetics also publishes annual letters and hosts periodic investor calls and webinars for INFL, which provide additional context on how the strategy is being implemented and how the firm views the prevailing economic and market environment.

Investor communications and resources

Over time, the Horizon Kinetics Inflation Beneficiaries ETF has been the subject of multiple investor update calls, webinars and annual letters. These communications have addressed themes such as the evolution from what the firm describes as an era of capital abundance toward a regime of capital scarcity, and the implications for structural versus cyclical inflation. The portfolio management team has discussed how INFL’s holdings are positioned relative to these themes and has provided commentary on how the strategy has navigated different inflation and interest rate backdrops since inception.

Horizon Kinetics makes materials such as annual letters, webinar replays, slides, performance information, expense ratio data and top holdings for INFL available through its own channels. The firm also reiterates that past performance does not guarantee future results and that investors should consult the fund’s prospectus and their own advisers when evaluating the ETF.

Frequently asked questions about Horizon Kinetics Inflation Beneficiaries ETF (INFL)