Active fund managers think they can do better than index funds in the market for Treasury Inflation Protected Securities or TIPS.
That’s according to the WSJ’s Ian Salisbury‘s analysis of a recent research report by Pacific Investment Management Company (PIMCO). The report points to the fact that the TIPS market is small relative to the overall government bond market which arguably makes it less efficient.
The report also argues that TIPS ETFs such as the iShares Barclays Capital TIPS Bond Fund (TIP) have predictable trading patterns that other traders can profit from.
An iShares spokesperson comments that ETF managers actually have more flexibility than the PIMCO report describes. Ironically, PIMCO has filed to bring several new TIPS ETFs to market.