Real Assets ETFs: Do They Hedge Inflation?

A real assets sleeve is the standard answer to worrying about inflation. Property, toll roads, pipelines: businesses that own physical things and can charge more for them when money buys less.

Then 2022 happened. US consumer prices rose 6.5% over the year to December, the BLS reported. USRT, which holds US real estate investment trusts, returned -24.40%. IGF, which holds global listed infrastructure, returned -0.95%. Both funds carry the real assets label, and they behaved nothing alike.

Whether one of these funds protects you from inflation depends on which of the businesses under the label you bought, and how long you hold it.

Three different businesses under one label

VNQ and USRT own shares in listed property companies. IGF and IFRA own utilities, transport operators and telecom firms, which are mostly ordinary industrial stocks that happen to run physical networks. Then there is a third group again: AMLP holds pipeline partnerships. Every one of these is a stock fund. None holds an inflation-linked bond, and none holds a physical commodity.

What sits inside a REIT fund is also further from the pitch than the name suggests. Vanguard's fact sheet for VNQ, dated 30 June 2026, puts health care REITs at 17.6% of the fund, retail at 14.8%, industrial at 11.2%, data center REITs at 10.2% and telecom tower REITs at 8.0%. Equinix, American Tower and Digital Realty all sit in the top ten holdings. A good part of what reads as "US property" is server halls and mobile masts let to technology tenants.

Do REIT funds hedge inflation?

Over long horizons, yes, and better than the stock market does. Muckenhaupt, Hoesli and Zhu (2025) ran a regime-switching model over US listed real estate from 1975 to 2023, and over the UK, Japan and Australia from 1990. In all four markets, listed real estate hedged expected inflation in the long run, with a stronger result than stocks.

Two conditions came with that. The short-term hedge weakens toward zero or turns negative during turbulent periods. And the hedging ability sits in the capital values. The dividend, which is what REIT funds are usually sold on, contributes little of it.

The first condition is the expensive one, because inflation shocks and market turbulence tend to show up together. Over the five years to 30 June 2026, VNQ returned 2.79% a year. Vanguard's total world stock fund, VT, returned 10.89% a year over the same window. Those five years are when the inflation happened.

Why REITs fell in 2022

The mechanism is rates. A listed property company borrows to buy buildings, so higher financing costs land straight on its earnings, and its dividend competes for the same income buyers as a government bond. A central bank raising rates to fight inflation pushes on both at once, which is why the asset built to track prices can fall hardest in the year prices move.

What a REIT fund yields

Income draws most buyers to these funds, and the yields are lower than that reputation suggests. At 30 June 2026, USRT's 30-day SEC yield was 2.91%, IGF's 2.79% and IFRA's 1.44%. US tax rules treat REIT distributions as an exception to qualified dividend income under section 857(c), so they generally miss the lower qualified-dividend rates. Which account you hold the fund in therefore does real work, and that is the subject of asset location.

Do infrastructure funds hedge inflation?

The infrastructure case is more specific than the property one. A regulated utility's tariff resets against a price index. A concession contract can carry an explicit escalator. Nobody builds a competing airport.

Rödel and Rothballer (2012) tested it on more than 1,400 listed infrastructure companies across 45 countries and found that infrastructure equities did not hedge inflation more effectively than general equities. Only the subsample of companies with high pricing power showed an effect, and only over a five-year horizon. Wurstbauer and Schäfers, working on US data from 1991 to 2013, found no short-term hedging in listed infrastructure either, and put it down to how much debt these companies carry.

Pricing power is the discriminator in that paper, and it splits the two funds on this shelf. IGF tracks the S&P Global Infrastructure Index and buys transport, communication, water and electricity operators, the businesses whose tariffs are set by contract or by a regulator. IFRA's index balances asset owners against what iShares calls infrastructure enablers, which pulls in construction and equipment companies that price into a competitive market like any other industrial. Their three-year equity betas are 0.47 and 0.85.

The 2022 numbers follow that split. IGF returned -0.95% and IFRA -3.11% while IVV, tracking the S&P 500, returned -18.13%. One year proves nothing about a hedge. It does show that the fund holding more of the pricing power is the one that barely moved.

You may already own the property sector

VNQ tracks the MSCI US Investable Market Real Estate 25/50 Index, which is a sector slice of the US market. If you hold a total-market or S&P 500 fund, you already own those companies at their market weight. Buying a REIT fund on top overweights a sector you already hold, at a higher fee than the broad fund charges. The same goes for the utilities and industrials inside an infrastructure fund. Picks and shovels works through how to check what a sector fund adds to what you hold.

The pattern is not US-only. The same study found the long-run hedge in the UK, Japan and Australia as well as the US, and REET holds 320 REITs from across developed and emerging markets for 0.14%. It fell 23.92% in 2022, close to USRT's 24.40%. The rate channel does not stop at a border, and neither does the overweight question: a world equity fund already owns those companies too.

Cost, and the MLP fund's tax wrapper

Cost is where the shelf splits hardest. USRT charges 0.08%, IGF 0.39%. At the far end, AMLP charges 1.01%, and its structure is unusual enough to explain separately.

Because AMLP holds mostly master limited partnerships, it cannot elect to be treated as a regulated investment company. Its April 2026 summary prospectus states that the fund is taxed as a regular corporation instead, and accrues a deferred tax liability for the capital appreciation in its portfolio, computed at the 21% federal corporate rate plus a state assumption. That accrual is reflected in the net asset value every day.

Legitimate use: an investor who wants midstream energy income from one ticker, without partnership tax paperwork, is buying precisely what that wrapper is for. The corporate-level tax is the price of the convenience. You can filter the screener for real assets funds and sort on cost, and the real estate sector page ranks the property funds on cost and yield.

Size a real assets sleeve like a satellite

None of this makes a real assets sleeve a mistake. Long-run inflation protection from listed real estate is a real finding, and the infrastructure funds did hold up in 2022.

It belongs in the satellite sleeve, which a core-satellite portfolio caps at 10 to 30% of the total. And if inflation is the specific worry driving the purchase, the instruments built for that job are inflation-linked government bonds like TIP and gold. Neither one is inside any of these funds.