Inflation and Your Portfolio
The VNFA Investment Department takes a long-term approach to managing inflation. Although our team stays abreast of all regular data points, we do not endeavor to alter the portfolio meaningfully based on short-term metrics because we feel that we are strongly positioned for a range of long-term inflationary scenarios. Our fixed income portfolio maintains a duration approximately 2/3 of that of the Barclays Aggregate Bond Index, our benchmark. In turn, our fixed income is likely to outperform in an inflationary scenario under which interest rates increase. While our fixed income holdings may underperform in a falling-rate outcome, our investment personnel believe that a persistent declining rate environment is improbable given how low rates are at present. On the equity side, we are invested with a modest growth tilt. Generally speaking, growth companies are relatively insulated from inflation as they oftentimes have pricing power, enabling them to pass higher prices onto their customers and maintain profitability. On the other hand, our equity managers have proven their long-term outperformance in recent periods, which were characterized by tame inflation.

VNFA’s Investment Department remains adaptable to new information but disciplined with respect to a long-term outlook. WATCH A SHORT VIDEO to learn more about the general impact of inflation on your investment portfolio and reach out to your Financial Advisor or our Investment Department with any questions.