A higher-than-expected reading for the consumer price index shows inflation remains a persistent threat, punishing the broader market but fueling a 20% year-to-date rally for the Horizon Kinetics Inflation Beneficiaries ETF (INFL). The fund has significantly outperformed the 7.7% gain for the S&P 500 this year.
"We expect this strategy to continue to preserve capital, while maintaining exposure to the upside," James Davolos, lead portfolio manager for the INFL ETF, said in an e-mail.
The fund’s outperformance comes from its portfolio of companies tied to commodities and real assets, which have benefited from a spike in crude oil prices following the conflict in Iran. Top holdings include silver miner Wheaton Precious Metals, uranium producer Cameco, and land-holding companies like Landbridge and Texas Pacific Land in the oil-rich Permian Basin. Other inflation-focused funds have also seen strong returns, with the Avantis Inflation Focused Equity ETF (AVFL) up 11.5% and the iShares U.S. Infrastructure ETF (IFRA) climbing 17% in 2026.
A key driver for the fund's holdings is the capital spending boom in artificial intelligence, which requires vast quantities of tangible assets. “Front-loaded AI capital spending requires vast quantities of tangible assets—including land, water, gas, oil, uranium, metals, aggregates, and specialty chemicals,” the fund’s managers wrote in a March letter to shareholders. This has pushed prices for commodities like copper back toward record highs. Even with the sharp gains, the INFL ETF trades at roughly 24 times forward earnings estimates, a figure supported by a 14% increase in consensus earnings estimates for its holdings since the end of February.
The reliance on high commodity prices presents the main risk. Should oil, copper, and other real assets see prices fall, the fund’s performance could quickly reverse. "If you hadn’t had the war in Iran, oil prices would be doing nothing,” said Jeff Muhlenkamp, portfolio manager of the Muhlenkamp Fund, who is warier of the sector.
The fund's performance highlights a growing theme of investing in the physical infrastructure underpinning the digital economy. For investors, the key is whether the demand from the AI build-out can sustain high commodity prices even if geopolitical tensions ease.
This article is for informational purposes only and does not constitute investment advice.
