In the vast landscape of alternative assets, inflation-linked bonds fly under the radar, overshadowed by the more glamorous private equity, venture capital, infrastructure, and real estate. But isn’t it time we rethink this overlooked category?

Inflation-linked bonds stand out due to their low correlation with both stocks and nominal bonds, and they are an exceptional choice for those seeking to hedge against inflation—better than any other asset class. Moreover, these bonds come with a bonus: they are ultra low-cost.

Historically, inflation-linked bonds haven’t been in the limelight because we had a 40-year period of low or declining inflation. However, the narrative changed in 2022 when inflation surged.

In 2022 these bonds did provide the inflation hedge but that narrative was overshadowed by rising “real” yields which dented their performance.

Investors who are wary of “real” interest rate sensitivity of these bonds, can mitigate the risk by buying shorter duration bonds, thus experiencing purely the inflation hedge and low correlation that they offer.

Inflation-linked bonds deserve recognition as a genuine alternative asset class. Their ability to fortify a diversified portfolio, combined with the low cost of investment, truly makes them the unsung heroes of the alternative assets world.